Countrywide stock hits all-time low after new shares issued

Issue of over 140 billion shares to raise cash to reduce debt burden fails to impress City investors.

Countrywide shares dropped to an all-time low of just 12.5p per share at end of play yesterday, having started the day at 13.9p, a drop of 10% in one day.

The reduction in share price followed yesterday’s issue and admission of 1.4 billion shares by the company to the London Stock Exchange, part of a refinancing plan that raised £140 million to restructure its debt.

When the refinancing plan was announced on 2nd August the company’s took another hit, fallilng from 49p to 16p, a drop of 67%.

This dramatic reduction reflected both the cut-price 10p share price that investors were offered to induce institutions to effectively lend it money, and the widespread belief that Countrywide needed to restructure its debt just to keep trading.

But its main investors still have faith in the company.  At a meeting last week some 98% of its existing investors such as Oaktree Capital Management and Brandes Investment Management, approved the deal.

New backer

The company also has a new major investor. Global investment firm Hosking Partners now owns 89 million Countrywide sharers, or 5.5% of the company’s total 1.64 billion shares.

City analysts welcomed have welcomed the share issue but say the company faces a bleak future unless the business can return to growth.

“Countrywide is back from the brink, though it is still fighting an uphill battle on a rather slippery slope,” says Laith Khalaf (pictured), a senior analyst at Hargreaves Lansdown.

“The injection of cash will keep the wheels turning for now, but that money is being used to pay down debt rather than to fund growth.”


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