Santos (STO) shares slumped 28% yesterday after trading resumed on a shortfall in the institutional part of the gas player’s underwritten $2.5 billion equity raising.
The stock slid $1.66 to $4.25 at the close yesterday after being halted all week since Santos announced its $3.5 billion rescue plan on Monday. The shares had closed at $5.91 last Friday.
The decline was almost 16% from the theoretical ex rights price of $5.15.
Helping drive the price lower was not only the weak outlook for Santos, but the 5% plus fall in oil futures prices since late last week.
STO 1Y – Santos shares sink on shortfall
On Monday Santos had confirmed a shortfall in the take-up by institutional investors of the heavily discounted shares in the offer, at 86%.
The shortfall of entitlements cleared in a bookbuild on Wednesday at $4.60, giving investors that renounced 75c for each entitlement sold on their behalf.
But Santos executive chairman Peter Coates claimed the issue was a success and said it gave “clear sign of confidence" in the $3.5 billion package of measures that would the company’s debt load.
It is not known whether Santos’s new cornerstone shareholder, the private Chinese firm Hony Capital, took up more shares in the bookbuild.
Such a move would have lowered its average purchase price for the stock, but won’t be known potentially until November 21 when it will have to file a substantial shareholding notice after the issue is settled.
The retail part of the offer, due to raise about $1.35 billion, opens next week and will produce a lower take-up than for professional investors. Entitlements not taken up by retail shareholders will be offered for sale through another bookbuild on December 3.
Shareholders are able to buy one new share at the offer price of $3.85 for every 1.7 shares they already hold.
Given the weak outlook for oil and gas prices (oil futures are drifting closer to $40 a barrel), many investors will forgo the issue and buy into Santos is they feel the need to in coming weeks.
