Made.com Group PLC (LSE:MADE), the struggling online furniture retailer, said a potential equity raise is one of the options it is looking at.
After floating last year, shares in the company have fallen 92% this year after a trio of profit warnings, most recently in July when it cited volatile trading and worsening consumer confidence, and hinted that a fundraising could be on the cards.
The group issued a statement this morning in response to recent press speculation it may go cap-in-hand to investors for around £50mln of new cash, which would be more than the current market value of the company.
It said it is "considering all options to allow it to strengthen its balance sheet" and confirmed these options "include a potential equity capital raise".
Analysts said this would lead to "massive equity dilution".
This and other options are still being considered, Made said, with investors to be told "if and when appropriate".
The embattled company has also hired PricewaterhouseCoopers (PwC) to examine cost-cutting and other restructuring options, according to a report by Sky News.
In the profit warning last month, Made said gross sales in the first half sales were down 19% compared to the same period last year as economic conditions were making it difficult to attract new customers as well as hitting demand for discretionary big-ticket items.
But it expected these issues to “substantially normalise” in the coming six months as a result of reductions in inventory levels.
Shares fell 10% to 8.88p on Thursday morning.
"For those left holding the baby in Made, assuming that its founders now steer clear, this is all very worrying, frustrating and sad news in truth, especially for its circa 600 employees, let us not forget," said analyst Clive Black at broker Shore Capital.
He noted that most discretionary retailers are facing into the challenges of the macroeconomic slowdown as rising inflation squeezes household spending.
"Made is not the only retailer to announce weaker trading in recent times. What it has been though is also exposed to the particular eschewing of the online channel by shoppers in CY22 as they seek to reduce the temptation to spend.
"Furthermore, the reality is that most folks want to smell, touch and feel big ticket soft furnishings and so the reality of Made.com’s addressable market as a pure-play probably needs to be revisited."
Black also noted that Made and other big-ticket retailers particularly suffer from headlines around solvency, "as it creates understandable nervousness on behalf of the shopper as to whether or not their big-ticket order will arrive, so further deflecting custom away from a brand just when order flow and working capital are really needed".
As such, he said a business that "probably never should have had a valuation of c£775m in truth," is now struggling to survive.
"For those shareholders that took the IPO in good faith, for the employees and customers of Made, we hope that favourable remedies can be found because as a minimum massive equity dilution appears to be ahead."
** Update: adds detail, share price, analyst comment **