Saipem’s cash call falters as retail investors flee

A Saipem logo is seen on the deck of the deepwater drilling vessel Saipem 10000 in the port of Genoa, Italy, November 19, 2015. REUTERS/Alessandro Garofalo

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  • Sector collapses on fears of recession
  • Cheap rights price makes good trades
  • The 2016 cash call was subscribed at 88%

MILAN, July 5 (Reuters) – Retail investors on Tuesday gave up their rights to buy a 2 billion euro ($2 billion) cash call from Italian energy services group Saipem, raising risks for investors. banks that have agreed to mop up all unsold shares unless institutional buyers take over.

Saipem is appealing to investors in tough markets after a sharp drop in profits in January due to deteriorating spreads on contracts. find out more The capital increase runs until July 11th.

Joint global coordinators BNP Paribas, Citi, Deutsche Bank, HSBC, Intesa Sanpaolo, UniCredit and joint bookrunners ABN AMRO, Banca Akros, Santander, Barclays, BPER, Goldman Sachs, SocGen and Stifel have all agreed to underwrite the issue .

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The price of the rights fell 94% on Tuesday to just 1.1 euro cents, reflecting selling by retail investors on the last day the rights can change hands.

Since Saipem shares are trading significantly above the subscription price of the rights offering, some investors might bet that they can buy new shares and then sell them back at a higher prevailing market price one day. after the offer was completed, according to bankers at three consortium lenders, who spoke on condition of anonymity.

The shares, down 50% since the start of the year, closed down 2.8% at 2.502 euros each.

The new shares are sold at a price of 1.013 euros each with a ratio of 95 new shares for one ordinary and savings share held.

Underwriters were counting on strong crude oil prices, strong sector momentum as Europe strives to wean itself off Russian gas as well as Saipem’s good recovery progress to place the new shares with investors, said the bankers.

However, with markets grappling with the impact of record inflation and rising interest rates, finding buyers for all of Saipem’s new shares is proving to be a difficult task.

“The market context was not ideal to undertake this type of transaction, but Saipem could not wait,” said Marco Opipari, analyst at Bestinver.

“The deal has not been well received by investors and I believe that a large part of the capital increase will be underwritten by the consortium of guarantor banks,” he added.

Down 6% on Tuesday, the European oil and gas index (.SXEP) posted its worst decline in two years as heightened recession fears sent crude prices tumbling. Read more

Saipem last issued new shares in 2016, raising 88% of the targeted 3.5 billion euros, leaving some 500 million euros for underwriters.

Under a new plan to 2025, Saipem plans to focus on its former offshore engineering and construction businesses as well as liquefied natural gas to leverage Europe’s efforts to diversify sources of energy.

The group’s largest shareholder, oil and gas group Eni (ENI.MI) and public lender CDP, have pledged to participate in the fundraising to keep their combined 44% stake unchanged, leaving investment banks pay the rest.

($1 = 0.9714 euros)

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Additional reporting by Francesca Landini in Milan and Lucy Raitano in London; Written by Valentina Za; edited by Keith Weir, Alexandra Hudson

Our standards: The Thomson Reuters Trust Principles.

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