Xerox Surges 10% on Warrant Distribution to Accelerate Debt Reduction
Board approves one warrant for every two shares at $8 strike, allowing debt-for-equity swap to bolster balance sheet
Xerox Holdings Corporation shares jumped nearly 10% on Wednesday after the printing and office equipment company announced a pro-rata warrant distribution to shareholders, part of a broader strategy to accelerate debt reduction amid a multi-year turnaround effort.
The Norwalk, Connecticut-based company said its board approved distributing one warrant for every two shares of common stock held as of February 9, 2026, with distribution expected on or about February 11, 2026. The warrants are exercisable at $8.00 per share—a substantial premium to Xerox's current trading price of approximately $2.34—and will expire two years from issuance, according to the company's press release.
What sets this warrant program apart is the flexibility it provides: shareholders can exercise warrants using cash or, notably, debt securities of the company. This debt-for-equity mechanism represents a creative approach to deleveraging, allowing Xerox to reduce its $800 million in high-interest debt without requiring fresh capital inflows during a period of financial strain.
The move comes as Xerox executes its "Reinvention" strategy, an ambitious transformation from traditional printing hardware to a services-led, software-enabled workplace solutions provider. A cornerstone of this pivot was the July 2025 acquisition of Lexmark International II, LLC, which the company financed through a complex capital structure restructuring.
To fund the Lexmark purchase and redeem existing debt, Xerox in April 2025 completed a private offering of $400 million in 10.250% Senior Secured First Lien Notes due 2030 and another $400 million in 13.500% Senior Secured Second Lien Notes due 2031. These high-interest notes, combined with the company's persistent operating losses, have left Xerox with a debt-to-equity ratio of 7.61, one of the highest leverage levels among technology services companies.
The warrant announcement follows a turbulent month for Xerox shares. On January 10, the stock plunged 13.7% after the company disclosed plans for a $250 million securities offering, which investors initially viewed as dilutive and indicative of deteriorating financial position. The subsequent rebound and Wednesday's 10% surge suggest the market now views the warrant distribution as a more balanced approach to balance sheet optimization.
"This warrant distribution aligns the interests of shareholders with the company's deleveraging objectives," said the company in its announcement, noting that the program is designed to "enhance shareholder value and accelerate debt reduction" without the immediate cash outlay typically required for capital structure optimization.
Xerox's financial metrics underscore the urgency of these efforts. The company reported trailing twelve-month revenue of $6.6 billion with a negative profit margin of 14.8%, while operating margin came in at negative 2.6%. Return on equity stands at negative 91.9%, reflecting the heavy burden of debt and ongoing restructuring costs. However, quarterly revenue growth of 28.3% year-over-year and earnings growth of 17.7% suggest the core business is stabilizing despite the balance sheet challenges.
Analyst sentiment remains cautious. The stock currently holds two hold ratings and one strong sell rating among analysts covering the company, with an average target price of $3.75—approximately 60% above current levels. The bullish case rests on successful integration of Lexmark and margin stabilization in the services business, while bears point to secular decline in printing volumes and intense competition in IT services.
The warrant distribution structure creates an interesting incentive dynamic. With the $8 strike price well above the current stock price, the warrants are effectively out-of-the-money, meaning they hold speculative value that could materialize if Xerox's turnaround gains traction. Should the shares approach the exercise price before expiration, the company could potentially reduce debt through debt-for-equity exchanges, creating a virtuous cycle of improving financial metrics that could further support the stock price.
Institutional investors, who hold approximately 81% of outstanding shares, will be closely watching the warrant mechanics and management's execution of the broader Reinvention strategy. The company's ability to execute this delicate balance of reducing debt while investing in a services transformation will determine whether Wednesday's 10% rally represents the beginning of a sustained recovery or another false start in Xerox's multi-year turnaround saga.