Myer shares yesterday crashed to an all-time low of 90 cents, raising doubts about its $600 million turnaround strategy.
Myer shares are now way down from Monday’s $1.21 closing price and well below the $4.10 a share investors paid in the $2.3 billion initial public offering in 2009. The company is now worth $739 million
It is also shy of the 94¢ price for the rights issue Myer announced on Tuesday as part of its $221 million capital raising to help execute the strategy. If the share price stays below 94 cents, it means retail investors won’t be taking up the offer. Instead, Myer will have be relying on institutions and Goldman Sachs underwriting it.
“It reflects a very low confidence in the strategy that has been articulated,” Credit Suisse retail analyst Grant Saligari told The Australian. “Basically to trade below the rights price is pretty significant. It’s a very poor show of confidence.”
The $122 million retail offer – originally $117 million – scheduled for next week has been fully sub-underwritten.
Analysts are saying one of the problems is that the $221 entitlements offer comes while equity markets are convulsing with volatility and coincide with weak retail sales figures for July.
The proposed turnaround, dubbed the New Myer strategy by Myer CEO Richard Umbers, seeks to reverse the under-investment and 20 year decline in sales through various means.
These include reallocating 41,000 square metres of floor space from underperforming goods to new and higher performing categories and services, bringing British fast fashion retailer Topshop into more than 20 Myer stores across the country, and focusing on a narrower range of 40 or 50 of the most wanted brands.