Rolls Royce shares slumped to another low on Monday as investors reacted to the news of a potential equity raise of up to £2.5 billion. The company released a statement on Saturday to answer media speculation. Management said, “We continue to review all funding options to enhance balance sheet resilience and strength. Amongst other options, we are evaluating the merits of raising equity of up to £2.5bn, through a variety of structures including a rights issue and potentially other forms of equity issuance. Our review also includes new debt issuance.”
The company also reminded investors that they had mentioned exploring further balance sheet options during the recent earnings release. It was noted that no final decisions had been made on the finance actions. The news will add with to a share price that has lost 75 percent since January.
Rolls Royce share price has been under pressure after its business slumped with the virus lockdowns. The company earns its revenues through “flight hours” for its engines, but the airline industry was rocked by the shutdown of air travel globally.
British Airways owner IAG announced that the company was also seeking to do a £2.5bn rights issue, whilst the company announced last week that 10,000 jobs were at risk. BA is currently operating at 25-30% of its capacity, with additional quarantine rules in Europe having a negative impact on demand.
The Rolls Royce share price has been crushed this year and it’s hard to see where support comes with the threat of a second lockdown in the U.K. appearing in the last week. The stock would need to get back above 212p to mount a serious recovery. The Investing Cube team is available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.
