Ocado shares fell this morning after the announcement that it plans to raise £1bn to help it capitalise on the online grocery market boom triggered by the coronavirus crisis.
The British online supermarket and technology group said yesterday that it would raise about £657m through an equity placing and retail offer, and about £350m through the issue of bonds.
However, its share price fell 5.8 per cent in morning trading, after the placing, which came at a discount, diluted its value.
Michael Hewson, analyst at CMC Markets, said: “The company has already signed a number of deals with high profile grocery chains in the US, France and Canada, and earlier this year sold half of its retail business to Marks & Spencer.
“For now, the company’s valuation appears based on the hope that its revenues will grow exponentially as the world’s supermarkets do more of their everyday business online.”
However, he added, it has “spent an awful lot of money and it’s still not profitable”.
Ocado shares have nearly doubled over the last three months, giving it a stock market capitalisation of £14.6bn yesterday – more than the combined market value of Sainsbury’s Britain’s second biggest supermarket group by sales, Morrisons, the fourth biggest, and Marks & Spencer.
But Hewson added that after such dramatic growth, a placement like this was “sure to hit the share price”.
The group highlighted industry data showing online penetration had almost doubled in recent months to 13 per cent of the UK grocery market, from seven per cent pre-coronavirus.
Ocado said globally, online grocery penetration is currently low with significant scope for expansion.
Ocado said the step up in online growth was expected to generate a permanent and significant increase in online penetration.