EasyJet, Fasten Your Seatbelts : -15% Today
13 September 2021
During my few flying sessions over the island of Yeu, during the stall exercises - agonizing moments during which my instructor asked me to put the plane at the limit of its lift capacities -, I learned a fundamental lesson: gravity.
That's the lesson EasyJet's investors are now learning the hard way.
The company announced last Thursday (September 9) a plan to increase its capital by £1.2 billion through the issue of 300 million new shares. The company intends to strengthen its liquidity, to recover its pre-covid balance sheet structure and to take advantage of the investment opportunities opened by the pandemic. Are all the instruments in the green?
In reality, it is more like a forced landing: the new shares are issued at 410 pence/share* i.e. 50% below the closing price on Wednesday 8 September. This adds to the turbulence of EasyJet's previous market call (dated June 25, 2020), during which the company issued 60 million shares at a price of 703 pence, or only 5% below the previous day's reference price. The slight air pocket is becoming a cumulonimbus**.
The market seems to have finally pulled out the landing gear: with net debt rising from £326m in 2019 to £2bn in Q3 2021, more than £2bn burned over the same period, and fourth quarter passenger numbers forecast at 56% of Q4 2019 levels, it was time for the wheels to touch down.
After the increase, EasyJet is valued at nearly £5bn, almost as much as it was in March 2019. At the same time, the shareholder will have seen his investment fall from 1150 pence to 580 pence, a loss of 50%.
Maximilien
*: The current price of 580 pence includes the value of the DPS (170 pence)
** : Cumulonimbus are clouds of convective origin, members of the cumulus class. They are in fact cumulus clouds of very strong vertical extension whose upper part is made up of ice crystals.
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