September 13, 2012 / 4:36 PM / 5 years ago

Vestas shares slide on share issue fears

COPENHAGEN (Reuters) - Shares in Danish wind turbine maker Vestas (VWS.CO) plunged as much as 14 percent on Thursday as worries mounted that the company could ask shareholders for more capital, traders said.

Stock in the company, facing fierce competition from Asian rivals and a global economic downturn which is curbing investment in renewable power projects, slid for a third consecutive day.

Manufacturing problems, cost overruns and delayed revenues wiped out 2011 earnings and led to profit warnings in late October 2011 and January this year, damaging investor confidence and triggering job cuts and a sweeping reorganization.

The share price ended down 13.4 percent at 34.55 crowns after earlier tumbling as much as 14.3 percent to a more than two-week low of 34.19 crowns.

The shares were hit partly by a media report that Vestas could consider a 500 million euros ($644.42 million) rights issue if cooperation talks with Japan’s Mitsubishi Heavy Industries (7011.T) fail.

“It is the fear of a capital increase,” said Jyske Bank trader Martin Munk.

Vestas declined to comment on the report by Bloomberg newswire, which was based on anonymous sources and said that a share issue is “one option”.

A Vestas spokesman said that the talks with turbines manufacturer Mitsubishi about a potential strategic cooperation were continuing but had nothing to add.

Vestas announced the talks on August 27 without giving any details.

“We have to stick with the company announcement from late August where we confirmed that we are in talks with Mitsubishi, but we cannot comment on it,” Vestas spokesman Jens Velling said. “When we have something firm, we will go out with it.”

The stock, which lost two-thirds of its value last year on poor results and an increasingly bleak outlook, leapt after the news of the Mitsubishi talks but have cooled since then, and have fallen 26 percent since Monday’s close.

“There’s been three days with a fairly big drop from the highs,” said Sydbank’s head of equities trading Ole Jensen who added that the report rekindled share issue worries that existed before the Mitsubishi talks were disclosed.

“If these talks with Mitsubishi don’t result in anything, then this (share issue) could be the plan, and then you’re back to the story from a month ago -- that it could need to raise capital because of poor cash flow in the first half,” he said.

Worries of a share issue were stoked by Vestas’ announcement at the end of July that its banks had agreed to delay a mid-year test of its borrowing rules, which analysts said meant the company was in breach of its debt covenants.

News of the talks with Mitsubishi followed persistent rumors that Vestas could become a takeover target for Chinese or Korean wind turbine makers or for a western manufacturer like France’s Alstom ALSO.CO.

Vestas stock is widely held, with only BlackRock (BLK.N) holding a stake of more than 5 percent.

Financial market sources said that the absence of a major shareholder would make it difficult to carry out a rights issue.

“It would be way too uncertain,” one investment banking source said. ($1 = 0.7759 euros)

Additional reporting by Mette Fraende and Ole Mikkelsen; Editing by David Cowell

Our Standards:The Thomson Reuters Trust Principles.
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