{"id":491755,"date":"2023-05-14T10:59:35","date_gmt":"2023-05-14T08:59:35","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=491755"},"modified":"2023-05-14T11:00:14","modified_gmt":"2023-05-14T09:00:14","slug":"eoh-pain-continues","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/investing\/491755-eoh-pain-continues.html","title":{"rendered":"EOH pain continues"},"content":{"rendered":"

EOH investors struggle to show any reward for their trust in the company and for participating in the rights offer earlier this year.<\/p>\n

In October 2022, EOH announced that it was planning to raise up to R600 million through a R500 million rights issue and an additional R100 million BBBEE deal.<\/p>\n

The proceeds were aimed at settling most of a bridge facility, and EOH believes it will leave it with a sustainable capital structure.<\/p>\n

The successful rights issue was concluded at the beginning of the year, with EOH CEO Stephen van Coller saying it ushered in a new era for EOH.<\/p>\n

He said it boded well for the company\u2019s future to know that their strategy for EOH 2.0 has the backing of all their shareholders and lenders.<\/p>\n

It was not long before the oversubscribed rights issue euphoria wore off, and the reality of the company\u2019s challenges surfaced again.<\/p>\n

EOH\u2019s results for the interim period ending 31 January 2023 revealed shrinking revenue and a considerable decline in net profit.<\/p>\n

Unsurprisingly, the EOH share price remained under pressure despite Van Coller and his management team talking up the company\u2019s prospects.<\/p>\n

After four years of asset disposals, at big discounts to book value, the company had less debt but also much less revenue and assets.<\/p>\n

Investors who saw the problems early and dumped the stock early were the big winners. Those who stuck it out and believed in the turnaround story are licking their wounds.<\/p>\n

\"\"<\/a>

Stephen van Coller, EOH CEO<\/p><\/div>\n

Rights offer and shareholder pain<\/h2>\n

In the months following EOH\u2019s rights offer announcement, the share price plummeted by around 40%.<\/p>\n

Investors were faced with either realising the 90% loss or biting the bullet and doubling down on their investment.<\/p>\n

The rights offer required investors to more than match their EOH investment value. If not exercised, it diluted investors\u2019 value by almost 70%.<\/p>\n

Many EOH shareholders have seen enough and dumped the stocks ahead of the rights offer.<\/p>\n

Others were hopeful that the rights issue signalled a brighter future based on the turnaround strategy promised so long by management.<\/p>\n

To date, the sceptics have been proven right, and those who backed EOH\u2019s turnaround strategy have little to show for it.<\/p>\n

When EOH announced the rights offer, it had a market cap of R897 million. The market cap fell to R565 million in January 2023 when EOH announced the final details regarding the rights offer.<\/p>\n

EOH announced that the rights offer would allow investors to subscribe to 2.27 additional shares at R1.30 per share for every EOH share held.<\/p>\n

Buying shares at the rights offer price of R1.30 compared to the market price per share at the time translated to a discounted rights price of 32% to 48%.<\/p>\n

Daily Investor calculated that the breakeven EOH share price after the rights offer was around R1.70 per share.<\/p>\n

This is the share price EOH would need to trade at after the rights offer to leave the investor in a neutral position, not making any gains or losses.<\/p>\n

Since the rights offer, the EOH share price traded at an average of R1.71, almost identical to the breakeven share price.<\/p>\n

Investors have, therefore, shown no gains since the rights offer was issued.<\/p>\n

\n

This article was first published by Daily Investor<\/a><\/strong> and is republished with permission.<\/em><\/p>\n

Now read:\u00a0EOH reports massive drop in half-year profits<\/a><\/h3>\n","protected":false},"excerpt":{"rendered":"

To date, the sceptics have been proven right, and those who backed EOH’s turnaround strategy have little to show for it.<\/p>\n","protected":false},"author":341108,"featured_media":469825,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[80335],"tags":[6428,35],"class_list":["post-491755","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-eoh","tag-headline"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/491755"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/341108"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=491755"}],"version-history":[{"count":1,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/491755\/revisions"}],"predecessor-version":[{"id":491757,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/491755\/revisions\/491757"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/469825"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=491755"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=491755"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=491755"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}