Wednesday 28 October 2020 1:02 pm

Rolls-Royce shares halve after £2bn rights issue approved

Rolls-Royce’s stock halved today after the the engine-maker’s shareholders voted in favour of a £2bn rights issue.

After the morning’s trading, the blue chip’s stock was trading at 94.85p, down 56.7 per cent for the day.

Read more: Rolls-Royce shareholders approve £2bn rights raise plan

It’s the lowest the shares have traded at in over 15 years, and means that the stock has shed 95 per cent of its value this year.

The coronavirus pandemic has hammered the FTSE 100 firm because airlines pay the company according to how many hours its engines fly in wide-body jets.

International air travel still remains at historic lows, with many carriers cutting capacity over the winter due to increasingly strict travel restrictions.

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Yesterday Rolls-Royce confirmed that 99.5 per cent of shareholders had voted in favour of the rights issue.

The company will issue 6.4bn new shares – more than triple its existing number. For every three shares an investor holds, they can buy 10 additional shares at a cheaper price.

As a result, the firm has unlocked £5bn in extra liquidity through extending a loan for another year, as well as a new £2bn bond issue.

Joshua Mahony, senior market analyst at IG, said: “At a time where the company is already struggling to cope with the fallout from the first set of lockdowns, the almost inevitable period of secondary lockdowns in Europe does little to bolster confidence for Rolls-Royce.

Read more: Rolls-Royce shares sink 10% after it taps shareholders for £2bn in fresh funding

“With the current market cap down to £1.54bn, it is understandable for investors to question the value of a company that could easily end up pushing for yet another multi-billion rights issue down the line.”

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