WH Smith PLC (LON:SMWH) rose on Monday after announcing it is “in an advanced stage of preparation” to sell shares representing up to 13.7% of the company.
As of Friday, the retailer was valued at £1.1bn.
READ: WH Smith warns on profits as coronavirus hammers travel arm
In response to press comment published on Sunday, the newsagents' chain said the fundraise is a condition to receive a new £120mln loan.
The firm said these financing arrangements, plus cost-cutting measures, will provide “sufficient liquidity” to deal with the “substantial downturn” in trading seen over the past month.
Following governmental guidelines to prevent the spread of coronavirus, the company is operating some of its high street shops but all stores in railways and airports have been shuttered.
The Mail on Sunday reported that WH Smith might need to raise over 20% of its issued capital “to make sure it gets this right first time” and avoid another fundraise if the lockdown is prolonged.
Analysts at Peel Hunt cut the target price to 2,000p from 2,500p but said WH Smith "remains a company to be 100% supportive of and would fully participate in the share issue".
The broker expects annual cash burn of £30-40mln, while net debt was £180mln and headroom to £340mln.
However, with the new share placing of around £140mln and the £120mln lending facility, the company will have "much more breathing space".
"All investors should look to get involved in the raise and back a very strong company that we would class as a global leader", analysts commented.
Shares rose 2% to 1,031p on Monday morning.
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