By: Joseph on Mercoledì 18 Settembre 2002 15:28
Viste le varie preoccupazioni e le interessanti argomentazioni (complimenti a Mr.Luccarini oltre ai molti altri),
stamane è uscito l'ennesimo downgrade di Lehman B. su F.T e...prima anche questa view dello sferzante H.Dixon
WSJE(9/18) Breakingviews:How Share Fix Eludes France Telecom WSJE(9/18) Breakingviews:How Share Fix Eludes France Telecom
Edited by Hugo Dixon
Ask France Telecom or its government owner why the company has dithered over selling equity, and the stock response is the market is undervaluing France Telecom shares. The real reason is different. A rights issue is almost undoable while the stock languishes about 10 euros per share. No bank would rationally underwrite France Telecom raising 15 billion euros on a market capitalization of 12 billion euros, even if the government puts up its 9 billion euro share.
The standard practice for distressed companies seeking equity capital is to offer rights to shareholders priced at a deep discount. But France Telecom can't. Under French company law, it is unable to sell stock for less than the nominal per-share value of 4 euros. And at 4 euros, France Telecom would have to sell about 3.7 billion new shares to raise 15 billion euros. On top of the 1.2 billion outstanding shares, that would give a theoretical ex-rights price for the stock of only 5.4 euros. In other words, France Telecom would be selling new equity at a mere 26% discount to the theoretical ex-rights price.
Looked at from this angle, it would only take a 26% move in shares -- which are highly volatile -- to leave underwriters out of pocket. Consider a wider angle, and it might only take a 4% drop in the enterprise value -- the value of the shares plus the group's net debt of 70 billion euros -- to leave the underwriters horribly on the hook. That, although, depends on any other fixes used to reduce France Telecom's borrowings.
What can the French government do to get out of this mess? It might hang on in the hope the share price rises -- but that approach earlier on has helped to get things to their present disastrous pass. Instead, France's banks may have their arms twisted -- hard. Their shareholders should beware.