Online retailer Ocado has raised £575m in a share placing, rallying extra funds as demand dries up.
The London-listed firm announced the placing after the stock market closed yesterday, revealing just hours later that it had met its quota.
The placing auctioned off 72.3m shares at 795p — a nine per cent discount to yesterday’s closing price of 877.6p.
The online grocer performed well during the pandemic, where restrictions pushed households with extra lockdown cash towards home delivery-driven shopping, with many Brits deterred by in-store experiences.
However, Ocado has failed to shake off growing pre-tax losses, swallowing a £52.3m and £176.9m hit in 2020 and 2021 respectively.
Ocado’s share price has more than halved in the year to date, with investors unconvinced by the online grocery market in the bounce back to brick and mortar stores post-lockdown. Similarly, online delivery giant Deliveroo has lost nearly 60 per cent of its share price value over the past 12-months, as customers opt for in-house dining experiences.
“Shares in Ocado have lost further ground, dipping four per cent in early trade, as investors assess its plans to super-charge expansion and growth through a fresh round of capital raising.,” senior markets and investment analyst at Hargreaves Lansdown, Susannah Streeter said.
“Worries have ratcheted up about rapidly rising costs for the retailer amid mounting losses, particularly as shoppers are also showing signs of putting less in their virtual baskets as the cost-of-living crisis mounts.”
Russell Pointon, director at investment consulting firm Edison Group, told City A.M.: “Simplistically, companies raise new finance when they do not expect to generate sufficient cash flow in order to fund their investment requirements.
“Ocado is a company that strongly divides investor opinion given its long-term results with respect to net profit and cash flow generation and for expectations when these will improve.
“With this equity raise and new bank facility, management has indicated that Ocado will not require additional financing for its existing and expected customer commitments as the business becomes cash flow positive. Whether it is sufficient to change the held-views of individual investors remains to be seen.”
The company said the placement will “give the company enough liquidity to fund the requirements of its existing and expected customer commitments in the mid-term, driving strong growth and returns in the future.”
Off the back of the share placing, Ocado unveiled a £300m banking facility and reiterated full-year guidance.
Ocado added that the online grocery market continues to show “significant” growth and that it needs to “bring solutions to market even faster”.