Once again some local business media and excitable brokers have gotten well ahead of themselves after Myer (MYR) shares fell sharply yesterday after trading in the shares resumed on the ASX.
The shares were suspended at the start of this week after the company announced weaker full year results, skipped final dividend, a detailed revamp and strategic review, and a deeply discounted $221 million entitlement issue to help pay for the some of the $600 million, four-year cost.
The two for five issue was done at 94 cents a share, a 22% discount on the last close on Monday of $1.21.
So naturally, it was to be expected that Myer shares would fall to around 94 cents – after all, the terms of the issue signalled this was the stock’s new price level.
Many of the reports yesterday talked about new record lows for Myer shares – which they were, unadjusted for the impact of the issue.
Adjusting they were lower that $1.21 close on Monday, with the implied price of Myer shares after the issue around $1.13.
The shares closed at 90 cents yesterday under the weight of selling by fund managers who took up shares in the issue – they will buy back in at a lower price to generate profits.
Quite a few early reports and commentaries got excited about the ‘plunge’ and forgot impact of the issue, but not the weak result.
Investors have shown strong support for the $600 million turnaround plan by taking up shares in the $104 million issue for big investors.
Myer launches the $117 million retail offer next week, which has already been fully sub-underwritten (meaning the money is already guaranteed) and that will be the big test of the support for Myer’s revamp plan.
Myer is planning to cut its retailing size by 20% (implying more store sales and job losses) and is turning over clothing brands and revamping store appearances and expanding its online offerings.
The strategy is targeting sales growth of 3% a year out to 2020, when according to the plan sales would hit a record of $3.7 billion.
And elsewhere, shares in Kathmandu (KMD) fell more than 3% yesterday after its would-be bidder, fellow NZ retailer Briscoes, refused to lift its offer price, and in doing so all but abandoned the takeover bid.
Kathmandu’s directors said the cash-and-scrip offer of about $318 million was "inadequate and does not reflect the underlying value" of the outdoor goods retailer.
Briscoe said on Wednesday that it would not increase the offer value, nor would it extend the closing date past September 17 unless the offer becomes unconditional as to the 90% level of acceptances.
Kathmandu’s profit dropped 53% to $20 million in 2014-15, and it recently launched a review of its head office structure aimed at cutting staff and costs ahead of a wider examination of the struggling outdoor retailers operations, especially in Australia, its largest market.
