What is the expected impact on the company’s weighted average cost of capital (WACC) and cost of capital structure?

Impact on WACC and Capital Structure – The $400 million 9.75 % senior note issue adds a sizeable tranche of relatively high‑cost debt to Atlanticus’ balance sheet. Assuming the company’s pre‑issue cost of equity is in the mid‑12 % range and its existing debt carries a lower effective rate (most senior secured debt for comparable mid‑cap tech‑services firms trades in the 5‑7 % after‑tax range), the weighted average cost of capital will rise modestly. Using a simple post‑issue capital mix of ~55 % equity and ~45 % debt (the note will push total debt toward the 45 %‑50 % mark), the new after‑tax cost of debt (9.75 % × (1‑30 % corporate tax) ≈ 6.8 %) replaces a lower‑cost legacy debt line, lifting the overall WACC by roughly 0.3‑0.5 percentage points. The higher nominal coupon is offset by the tax shield, but the net effect is a slight uptick in the cost of capital and a modest increase in financial leverage.

Trading Implications – The issuance signals that Atlanticus is comfortable taking on additional leverage to fund growth or acquisitions, which can be positive for earnings if the capital is deployed efficiently. However, the higher WACC tightens the hurdle rate for new projects, potentially dampening future ROI expectations. In the short term, the note pricing at 9.75 % suggests the market perceives a moderate credit risk premium; investors may watch the credit‑rating agencies’ response. Technically, the stock has been trading near its 50‑day moving average; a breach to the upside could reflect confidence in the capital raise, while a break below may signal concerns over debt load and cost‑of‑capital pressure. Actionable tip: Maintain a neutral stance but consider a small‑to‑medium sized long position if the price consolidates above the 50‑day MA with volume support, hedging with put spreads to limit downside if rating downgrades or earnings miss occur. Conversely, short‑term volatility around the note filing could present opportunistic sell‑the‑rally trades if the stock spikes on the news but quickly regresses to the mean.