Ocado Group PLC (LON:OCDO) has raised £1bn of new cash from a slightly discounted equity placing and a convertible loan.
The equity placing of £657mln was announced and completed overnight at a price of 1,960p, a 5.7% discount to the previous closing price of 2,079p, and topped up with a £350mln convertible loan.
Of the equity raise, roughly £7mln was via a retail offer on the PrimaryBid platform.
Citing the accelerated shift to online grocery shopping because of the coronavirus lockdown, the FTSE 100 group said it wanted the extra cash to give it “the financial flexibility to move quickly and to capitalise on the full opportunity set over the medium term”.
Following the fundraising, the group will have £2.2bn of cash on the balance sheet, boosted by £750mln from selling half its UK retail business to Marks & Spencer (LON:MKS) last February and a £600mln bond issue in December.
Independent retail analyst Nick Bubb said his initial reaction “was that it was a real cheek for Ocado to ask investors to stump up more cash, as the company still has a ton of cash in the bank”.
“But with investor appetite for online stocks starting to wane in the short-term, after the huge rallies in recent months, the company must have been nervous that if it waited too long it might have missed the boat,” he said.
Analyst Clive Black at Shore Capital said it was somewhat of a surprise move and comes shortly after the company guided the market to the fact that it will still not make a pre-tax profit for 2020, 2021 and maybe even 2022, as it builds out its network of 50-plus fulfilment centres around the world.
“With its stratospheric current stock market valuation (c£15bn), we cannot really argue with the opportunism of Ocado's management in using the currency of its equity at this time whilst the bond is a clever move for this cash-hungry business in our view,” he said.