ARCHIVED FORUM -- March 2012 to February 2022READ ONLY FORUM
This is the second Archived Forum which was active between 1st March 2012 and 23rd February 2022
33DKK yesterday, then opened at 13.49, going as low as 12.49DKK this morning - down almost 65%.
Currently at 16.77DKK, down 43%
What on earth has happened?
Likely related to new shares issued - so if you add more shares, the price per share will fall. That's my guess. I believe they had announced a significant secondary share offering last week...
B&O in my life 😊:
It is because if you have a stock, you can buy 2 for 5DKK each.
But only if you bought the yesterday or earlier.
If you buy one today, you will not get the option of the two, and therefore the value is 66% lower then yesterday, as there is now 3x as many stocks if everyone buys their new stocks at 5dkk.
In reality the stock have increased a good portion, and it seem to be a positive trend in the stock.
And the new stocks are indeed the new funding which went through.
Beovision Harmony 77" 2nd Gen, Beolab 5, Beolab 17, Beosound 1, Beoplay M3, Beoplay Portal, Beoplay Earset, Beoliving Intelligence
Partly the dilution effect, but probably more important was that the share offering was at a massive discount - Bloomberg quoting a 60% discount once adjustments made for enlarged capital base.
Onerous terms as they say.
Link to Bang & Olufsen
Here is the link,
It is saying it all,
Makes sense now. Had me worried!
There is cause for worry - they were able to raise new funding, but at very tough terms.
Again, the lower star price reflects the large discount B&O had to offer to raise new money.
9 LEE: Makes sense now. Had me worried!
Sandyb: There is cause for worry - they were able to raise new funding, but at very tough terms. Again, the lower star price reflects the large discount B&O had to offer to raise new money. 9 LEE: Makes sense now. Had me worried!
Please correct me if I got this wrong but didn't B&O basically release its held-shares to the market, thereby actually gaining operating cash? If that is the case the only down side would be that a lot of those shares were buyback at a higher price, so the return on "capital" wasn't so good, but that's better than no cash at all?
I don't think it bad for B&O. Shareholders will wear the results, either way.
poodleboy: Sandyb: There is cause for worry - they were able to raise new funding, but at very tough terms. Again, the lower star price reflects the large discount B&O had to offer to raise new money. 9 LEE: Makes sense now. Had me worried! Please correct me if I got this wrong but didn't B&O basically release its held-shares to the market, thereby actually gaining operating cash? If that is the case the only down side would be that a lot of those shares were buyback at a higher price, so the return on "capital" wasn't so good, but that's better than no cash at all? I don't think it bad for B&O. Shareholders will wear the results, either way.
I dont see the big downside for me as an investor,
The money I will have to pay so I get 3x amount of stock, will give me the same % of the company that I have now. But the company now have 400mio xtra cash, which I myself was a part of putting in.
And right now if I could sell my 3x stock to the current price, than yesterdays price for 1x, I would gain much more. So right now it is very good. But the stock market is always a gamble.
Overall all B&O did, from what I can tell was to dilute existing shareholders but offered them the right to buy additional shares at a discount. The new shares I believe were all sold. Also, this is better than borrowing money with. the option of allowing the borrower to convert them into shares at some future market price. Those are toxic raises. This one by B&O here seems to be fine. What we will watch for is how the money is deployed by the company
B&O dont access the public debt markets.
Selling bonds would have been a lengthy process, required rating agency work most likely, and thus equity was the option that was available given the timeframe.
Raising capital given the current circumstances is something many companies have to do - nothing wrong in that per se.
Since financial markets fell to pieces in March, there have been floods of issuance (borrowing) in the debt markets by larger and medium sized companies , many of whom could do so quickly because they've tapped those markets before. Much more preferable to equity dilution.
But for B&O this was not an option, and presumably bank loans were rejected, hence the equity route. The question moreover is that these were sold at a seemingly pretty big discount - the signalling effect, let alone the dilution to existing shareholdings is far from positive.
Those who bought at a discount may make money on those subscriptions of course - and may have done so already, but then again so have the vast majority of shares in the last 6 weeks or so.
Jaffrey2230: Overall all B&O did, from what I can tell was to dilute existing shareholders but offered them the right to buy additional shares at a discount. The new shares I believe were all sold. Also, this is better than borrowing money with. the option of allowing the borrower to convert them into shares at some future market price. Those are toxic raises. This one by B&O here seems to be fine. What we will watch for is how the money is deployed by the company
Sorry Sandyb,
But the prices of the xtra shares does not really matter does it?
Off cause it could not be higher, no one would buy, and as there will be 3x shares the price should be /3 of the share price.
If that is correct, 5DKK seems correct, as the shares were down to 18DKK,
(I know this is a rough example, the numbers do not add up this easily)
Of course the price of the new shares being offered matters.
If you need to raise (say) $10mn, you'd rather give away as little equity (%'age) wise as possible to do so.
Emil Jensen: Sorry Sandyb, But the prices of the xtra shares does not really matter does it? Off cause it could not be higher, no one would buy, and as there will be 3x shares the price should be /3 of the share price. If that is correct, 5DKK seems correct, as the shares were down to 18DKK, (I know this is a rough example, the numbers do not add up this easily)
Sandyb: Of course the price of the new shares being offered matters. If you need to raise (say) $10mn, you'd rather give away as little equity (%'age) wise as possible to do so. Emil Jensen: Sorry Sandyb, But the prices of the xtra shares does not really matter does it? Off cause it could not be higher, no one would buy, and as there will be 3x shares the price should be /3 of the share price. If that is correct, 5DKK seems correct, as the shares were down to 18DKK, (I know this is a rough example, the numbers do not add up this easily)
Hallo Sandyb,
Can you explain what you mean in more detail.
As I am not sure if I don't understand what you are saying, or if I disagree?
I havent been through the maths of their offer, so I cant speak precisely.
You have to look at it this way.
Sometimes companies are able to raise new equity in positive circumstances (to fund acquisitions, investment etc), where investor confidence is strong. Because investors are embracing the reasons for the capital raising, the market capitalisation will like be seen rising over the medium term, and as such the extra equity base will dilute yes, but wit a projected rising value of the company, you dont see an obvious fall in the share price once the equity raise is done. In effect, investors are effectively buying more at the same or similar price.
This is not the case for what B&O have just done - not a criticism per se, as other companies are raising money to cope with COVID disruptions. But B&O have raised new equity at what Bloomberg describe as onerous (tough) terms. The discount to pre-issue share price was large from what I understand.
Put more simply giving away a large chunk of equity (or ownership) for a cheap price, just to get some money in - the signalling effect from this is not positive. Good that they managed to get it done and find the new investment, but you cannot ignore the discount they needed to offer to get this done.
From Bloomberg :
"Where rights offers are underway, the terms are onerous. That’s the case with Bang & Olufsen A/S, the Danish high-end hi-fi company whose chairman sadly passed away this week. It’s selling new stock at nearly 60% below the company’s implied share price, adjusted for the enlarged share count. That is a sizable discount given the shares had already dropped around 45% since January. "
Emil Jensen: Sandyb: Of course the price of the new shares being offered matters. If you need to raise (say) $10mn, you'd rather give away as little equity (%'age) wise as possible to do so. Emil Jensen: Sorry Sandyb, But the prices of the xtra shares does not really matter does it? Off cause it could not be higher, no one would buy, and as there will be 3x shares the price should be /3 of the share price. If that is correct, 5DKK seems correct, as the shares were down to 18DKK, (I know this is a rough example, the numbers do not add up this easily) Hallo Sandyb, Can you explain what you mean in more detail. As I am not sure if I don't understand what you are saying, or if I disagree?