Array Technologies' Convertible Notes Offering: A Strategic Play to Fuel Growth and Mitigate Risk

Charles HayesTuesday, Jun 24, 2025 9:59 pm ET
15min read

Array Technologies, Inc. (ARRY) has taken a bold step to bolster its financial flexibility and strategic positioning with its upsized convertible senior notes offering, marking a critical juncture for the solar infrastructure leader. By issuing $300 million in convertible notes due 2031—plus an optional $45 million upsized tranche—the company has engineered a capital structure that balances growth ambitions with investor protections. This move, coupled with its recent acquisition of

and the use of capped call transactions, positions to capitalize on the solar while mitigating dilution risks. Here's why investors should take note.

The Convertible Notes: A Winning Formula for Array?

The notes, priced at a 2.875% coupon—well below the 5.5% interest rate on its existing term loan—immediately reduce Array's cost of capital. The savings from refinancing $150 million of high-interest debt alone could free up millions annually for reinvestment in growth. The semiannual interest payments, starting in early 2026, further stabilize cash flow.

The conversion terms are equally compelling. The initial conversion price of $8.12 per share, a 27.5% premium to Array's June 24 stock price, creates an incentive for holders to convert into equity only if the stock rises significantly. This “sweet spot” aligns with Array's growth trajectory: if the stock outperforms, the company may avoid dilution by settling conversions in cash. Conversely, if shares remain below $8.12, Array could see its debt burden reduced without issuing new equity.

Capped Calls: A Shield Against Dilution

The capped call transactions, structured with a $12.74 per share cap (a 100% premium to the June 24 price), are a masterstroke. These derivative instruments effectively limit Array's potential dilution if the stock price surges post-offering. For instance, if shares climb to $15, the capped calls would theoretically offset the need to issue additional shares beyond the $12.74 threshold, sparing shareholders from excessive dilution. This mechanism not only stabilizes the equity base but also reassures investors that Array's growth won't come at the cost of their ownership stake.

Redemption Triggers and Investor Confidence

The notes include a redemption feature that allows Array to buy back the debt at par starting July 2029 if its stock price exceeds 130% of the conversion price ($10.56) for 20 out of 30 days. This clause incentivizes Array to drive stock appreciation while giving it flexibility to retire debt when financially advantageous. For investors, this creates a “win-win”: if the stock soars, they may convert at a higher rate, while Array retains the option to repurchase the notes at a favorable time.

The APA Solar Acquisition: A Catalyst for Growth

The $179 million APA Solar acquisition, finalized alongside the notes offering, adds immediate scale. APA's 2024 revenue of $129 million and $25 million EBITDA (versus Array's 2023 revenue of $842 million) expands Array's product portfolio into engineered foundations and fixed-tilt systems—key components for utility-scale solar projects. This diversification reduces reliance on tracking systems alone and aligns with demand for integrated solutions in a growing market. Analysts' mixed ratings—ranging from Mizuho's $9 price target to Oppenheimer's $13—hint at differing views on valuation, but the synergy potential is clear.

Investment Takeaways

  1. Lower Interest Costs: Replacing high-rate debt with cheaper convertible notes improves Array's margins and reinvestment capacity.
  2. Dilution Control: The capped calls and conversion terms shield shareholders from excessive equity issuance, making the offering more palatable for long-term holders.
  3. Growth Catalysts: APA Solar's integration and the broader solar sector's expansion (driven by policy tailwinds like the Inflation Reduction Act) could push Array's stock higher.

Risk Considerations

  • Stock Volatility: The capped call mechanism's hedging activity could temporarily pressure Array's share price.
  • Conversion Pressure: If the stock climbs above $8.12, Array may face increased conversion demands, testing its liquidity.
  • Market Conditions: The offering's completion hinges on investor demand and macroeconomic stability.

Final Analysis

Array's convertible notes offering is a deft maneuver that addresses near-term debt, funds strategic growth, and mitigates dilution risks. The 2.875% coupon and capped call structure position the company to thrive in a sector poised for expansion. Investors seeking exposure to solar infrastructure should view this as a confidence-boosting move, particularly if Array's stock approaches the $10–$13 range—a level that could trigger redemptions or conversions. For now, the combination of cost savings, APA's synergies, and disciplined capital allocation makes Array a compelling play on the renewable energy transition.

Consider

as a “Hold” with a positive outlook if the stock stabilizes above $9 and the APA integration delivers on cost synergies. A breakout above $12 could unlock upside to $14–$16, aligning with Oppenheimer's price target.