Convertible Debt Strategies: Array Technologies vs. PureCycle in the Race for Capital Efficiency

The renewable energy and recycling sectors are no strangers to capital-intensive growth strategies. Array Technologies (ARRY) and PureCycle Technologies (PCT) have both recently unveiled ambitious capital raises to fuel expansion—Array through a $250M convertible debt offering and PureCycle via a $300M convertible preferred stock offering. While both aim to leverage cheap capital markets to scale operations, their approaches differ starkly in structure, risk exposure, and strategic focus. Investors must weigh these nuances to assess which bet aligns with their risk appetite and time horizon.

Structural Differences: Debt vs. Equity Convertibles

Array's convertible senior notes due 2031 are classic senior unsecured debt instruments. The $250M offering—plus a $37.5M over-allotment—prioritizes debt repayment ($150M allocated to retiring existing loans) and acquiring APA Solar, a move that expands its solar tracker footprint. The convertible feature here acts as a dual-purpose tool: it reduces interest costs below market rates and offers investors a chance to convert into equity if Array's stock outperforms. However, the capped call transactions Array entered into with banks add complexity. These derivative contracts, designed to limit dilution, could backfire if the stock price surges beyond the cap, leaving investors holding shares worth less than anticipated.

PureCycle's $300M Series B convertible perpetual preferred stock, by contrast, is a hybrid instrument. Investors receive 7% annual dividends, paid in cash or equity, with conversion terms tied to a 30% premium over the 10-day VWAP of PCT's common shares. The “perpetual” nature means no maturity date, effectively locking in capital for long-term projects like its 130-million-pound polypropylene (PP) recycling facilities in Thailand and Belgium. This structure aligns with PureCycle's ambition to build a global recycling infrastructure by 2030, but it also subjects investors to prolonged equity dilution risk if conversion occurs at lower valuations.

Strategic Use of Proceeds: Defensive vs. Offensive Plays

Array's capital allocation is defensive yet opportunistic. Repaying high-interest debt improves its balance sheet flexibility, while the APA Solar acquisition accelerates growth in the booming solar tracker market. The company's focus on capped calls to mitigate dilution suggests it prioritizes maintaining shareholder equity stakes, even at the cost of capping upside potential. This cautious approach may appeal to income-focused investors, given Array's 3.2% dividend yield and stable cash flows from long-term solar project contracts.

PureCycle, meanwhile, is making aggressive bets on global recycling infrastructure. The Thailand facility's use of IRPC's existing infrastructure reduces upfront costs, but the company's reliance on partners and regulatory approvals introduces execution risk. The $300M raise is just the first tranche of what will likely be a multi-billion-dollar capital expenditure program by 2030. Investors here are effectively backing PureCycle's vision of becoming a global leader in plastic recycling—a high-risk, high-reward proposition contingent on sustained demand for circular economy solutions and regulatory tailwinds like the EU's Plastics Strategy.

Risk Exposure: Dilution vs. Operational Hurdles

Array's convertible notes carry two primary risks. First, the capped call mechanism could leave holders with suboptimal conversion outcomes if the stock price exceeds the cap. Second, the notes' lack of registration under U.S. securities laws restricts resale options, creating liquidity risks. Investors must also consider the $179M APA Solar acquisition: while accretive to earnings, it adds operational complexity and integration risks.

PureCycle's risks are more operational and market-dependent. Delays in permits for its Antwerp facility or construction cost overruns in Thailand could derail timelines, compressing margins. Additionally, the 7% dividend on perpetual preferred stock must be paid perpetually unless converted—a burden if cash flows falter. The company's forward-looking statements about billion-pound capacity by 2030 are contingent on factors like consumer demand for recycled plastics, which remains volatile amid economic cycles.

Investment Thesis: Choose Your Risk Appetite

For income-oriented investors seeking stability, Array's convertible notes offer a blend of debt security and potential equity upside, especially if solar demand remains robust. The APA Solar acquisition's accretive nature and Array's strong balance sheet post-debt repayment make it a safer bet.

Growth investors, however, may prefer PureCycle's convertible preferred stock for its exposure to the rising circular economy. The 30% conversion premium and 7% dividends provide a cushion against near-term volatility, while the global recycling infrastructure play positions PCT to benefit from long-term regulatory shifts favoring sustainability.

Final Verdict

Array Technologies' convertible offering is a calculated move to strengthen its financial foundation while expanding its market share. It's a conservative bet for those who prioritize capital preservation. PureCycle, on the other hand, is gambling on its ability to execute a massive global expansion plan. Its convertible preferred stock suits investors willing to accept operational and regulatory risks for potential exponential growth.

As of June 2025, with both companies trading near 52-week lows, the entry point is compelling. However, Array's lower volatility and immediate earnings accretion from APA Solar make it the safer pick. PureCycle's success hinges on execution—investors should monitor construction progress in Thailand (targeted for mid-2027) and regulatory approvals in Europe closely. Until those milestones are achieved, the PCT convertible preferred stock remains a high-risk, high-reward proposition.

Investment Recommendation:
- Array Technologies (ARRY): Hold the convertible notes for income and moderate growth.
- PureCycle (PCT): Consider the convertible preferred stock only if you can stomach extended downside exposure and prefer exposure to the circular economy's long-term trajectory.

The race for capital efficiency is on—investors must decide whether to bank on defensive stability or bet on transformative growth.