Pick n Pay share price dropped by 16% in mid-morning trade on the JSE yesterday before narrowing down to a 14.84% just before lunch time, with analysts saying this was in line with the stock adjusting for the new rights offer in the company.
The troubled chain grocer is seeking to raise R4 billion to settle its debt and turnaround strategy under a rights offer that the company has set to conclude at the beginning of next month.
Pick n Pay will also unbundle and separately list the budget grocery chain Boxer, into which it is also rebranding some of its struggling stores.
The company’s shares traded for the last time ex rights issue on Tuesday when it closed at R28.50 per share. Yesterday it opened at R25 per share before spinning into an early 16% loss of value before narrowing down this to a negative 15.44% at R24.07 just before lunch.
“Its probably ex the rights issue. So its just adjusting the price for new rights,” Roy Topol, portfolio manager at Cratos Asset Management said in an interview.
Market analyst Simon Brown also told Business Report that the plunge in the company’s shares on the JSE yesterday was a reflection of its stock going “ex rights offer at the close” of trade session on Tuesday.
Pick n Pay has awarded its CEO Sean Summers performance-based shares worth R108 million for him to turn the company around.
The retailer’s remuneration committee issued the shares to Summers at nil cost, saying they may vest subject to performance conditions being met, over a period of 32 months.
In the year to end February, 2024 Pick n Pay’s supermarket business tipped into a substantial trading loss of R1.5bn.
With the group’s overall loss for the period amounting to R3.2bn, including asset impairments for the same period, all eyes are now on Summers to drive it out of loss-making.
To achieve this, Pick n Pay has pressed the reset button on its grocery chain to come up with better but fewer outlets, with analysts saying Summers will likely be able to drive it out of loss-making.
“Summers can certainly make it better than it has been in years, that’s probably fairly easy. But (taking it) back to its former glory days, not so easy,” said Brown.
Under the rights offer, shareholders in Pick n Pay have the right to take up 51.11 rights offer shares for every 100 shares in the company at a price of R15.86 per share.
There are high hopes that shareholders will subscribe to the company’s rights offer to which the Ackerman family have already said they are committed to support the scheme by following their rights for an amount of up to R1bn.
Pick n Pay said it had already received “all the necessary approvals to implement the rights offer” which had now gone unconditional. South African banks Absa, RMB and Standard Bank are underwriting the capital raise.
“We are pleased the Pick n Pay Rights Offer is on track and we look forward to its successful conclusion,” said Pick n Pay yesterday.
BUSINESS REPORT