- Summary:
- The easyjet share price plummeted on Thursday after the company disclosed it had turned away a takeover bid and it is raising funds
The EasyJet share price slumped hard on Thursday, becoming one of the worst-performing FTSE 250 stock. The EZJ shares dropped to a low of 680p, which was its lowest level since January this year.
Why EZJ shares tumbled
There are two main reasons why the EasyJet share price tumbled today. First, the company said that it had rejected a takeover bid recently. The company did not name the potential acquirer and the amount it rejected. Therefore, investors sold the stock simply because, perhaps, a takeover would have been a good outcome for the company.
Second, the EasyJet share price declined after the company announced a new rights issue that will lead to more stock dilution. The firm intends to raise £1.2 billion. It intends to do this by buying 31 new shares doe every 47 existing shares ar a price of 410p.
In a statement, the company said that it will use these funds to fund its recovery and take advantage of growth opportunities that will arise from the aviation industry.
EasyJet and other regional airlines have performed better than their large counterparts. This is mostly because the tourism and leisure industries have recovered at a faster rate than business travel. Indeed, British Airways is said to be launching a budget airline soon.
EasyJet share price forecast
The daily chart shows that the EasyJet share price has been in a deep sell-off recently. Along the way, the stock has dropped by more than 35% from its highest level this year.
And today, it managed to move below the lower line of the descending channel shown in black. It also fell below the 25-day and 50-day moving averages. The stock also fell below the 61.8% Fibonacci retracement level.
Therefore, the shares will likely continue dropping in the near term, with the next key support level being at 600p. On the flip side, a jump above 800p will mean that there are still more buyers in the market.
