Shares in outsourcing company G4S have taken a beating over the past week after the Ministry of Justice announced that its government contracts would be reviewed after fraud claims.
G4S chief executive Ashley Almanza has ordered a sweeping review of G4S and is expected to announce measures to try and repair its balance sheet when he reports half-year results in August, Reuters reported.
Asked about the possibility of a rights issue, Almanza told The Sunday Times newspaper: “Shareholders have asked about this. I will conduct a full review of the business and evaluate the various options, and we have many options. I have not given any signal either way.”
Ishaq Siddiqi, market strategist, ETX Capital:
G4S shares again under pressure amid reports that the company may have to launch a rights issue in coming weeks due to the electronic tagging scandal. As the scandal could potentially lead to hefty fines and loss of contracts, G4S has reason to seek a rights issue in a bid to repair its balance sheet. This however would punish shareholders further who have had to deal with big blows to the company’s reputation over the past year. G4S’s share have fallen more than 26% over the past year, which means it could potentially drop out of the FTSE100. And, there’s unlikely to be any let up in the share-price decline as this scandal will acts as a nasty overhang in the stock price. Investors are growing cautious ahead of 1H results, due next month.