Nick Goodway: Cobham’s £507 million rights issue is easy to turn down

Nick Goodway on Cobham: Even at these deep discounts the rights issue does not appear attractive

Suzanne Plunkett/Reuters

1 June 2016

Cobham has launched its uneagerly awaited rights issue at what it described as a 45% discount to last night’s closing share price.

It is also a 58% discount to the closing price the night before April’s profit warning and a 74% discount to last year’s high of 345.1p.

Even at these deep discounts the rights issue does not appear attractive.

Cobham has not bothered with an update on April’s trading statement merely saying conditions “remain consistent” with then.

It is also promising to pay out £126 million in dividends.

That’s the same quantum of cash as last year but because of the new shares issued will mean a cut from 11.18p to 7.4p a share.

So more than quarter of what shareholders are subscribing to in the rights issue will be paid out in dividends. Not a policy which can continue for long.

The bulk of the £19.7 million costs (or a hefty 3.9% of the gross £507 million being raised) will go to joint underwriters BoA Merrill Lynch and Jefferies. This is one issue it is easy to decline and make the underwriters earn their fees.

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Nick Goodway: Cobham’s £507 million rights issue is easy to turn down

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