Hewlett Packard shares fall on $1.35 billion convertible stock offering for Juniper buyout

(Reuters) – Hewlett Packard Enterprise (NYSE:)’s shares dropped 6.4% in extended trading after the AI server maker announced a $1.35 billion mandatory convertible preferred stock offering to fund its acquisition of Juniper Networks (NYSE:).

Earlier this year, HPE said it would acquire the networking equipment manufacturer for $14 billion in an all-cash deal, in an attempt to enhance the company’s AI offerings.

HPE said net proceeds from the offering will be used to cover fees and expenses related to the pending acquisition.

A convertible preferred stock offering allows investors to buy preferred shares, which often fetch higher dividends than common shares. Investors also have the option to convert their preferred stocks into common shares.

The preferred stock offered by HPE will automatically convert into a number of common shares around Sept. 1, 2027, unless it has been redeemed or converted previously.

Investment banks Citigroup, J.P. Morgan and Mizuho will act as joint book-running managers for the offering, the company said.

Last week, HPE raised its annual profit forecast, citing increased demand for AI servers driven by higher enterprise spending on AI infrastructure.