Construction firm Carillion becomes a target as stock crashes for a second day
Collapse: Carillion shares dropped another 33.5 per cent yesterday
Carillion’s shares hit a record low as they dived for a second day prompting rumours that the construction company could be taken over.
Carillion closed at 77p as shares dropped another 33.5 per cent yesterday.
A total of 60 per cent – or £491million – has been wiped off its value since Monday’s announcement that it was pulling out of contracts and reviewing the business.
Hedge funds that predicted the wipeout continued to make a fortune yesterday. More than 25 per cent of the stock is shorted – where traders bet on the shares falling – and by now they could have made around £123million.
Laith Khalaf, analyst at Hargreaves Lansdown, said: ‘This is a classic example of a falling knife, with the share price going from bad to worse over the course of the trading day.
‘The one glimmer of hope is the dramatic fall in the share prices flushes out a takeover bid, though any potential suitors would have to relish a challenge.’
Liberum analysts said none of the plans to raise or save money seemed enough due to the £800m mountain of debt. It was ‘hard to see a solution without equity’, they added.
It is understood part of yesterday’s slide was down to retail shareholders pulling out via private brokers, after Carillion announced it would be suspending its dividend to save £80million.
Chief executive Richard Howson, 49, stepped down on Monday as the Wolverhampton firm announced immediate measures to stem borrowing, expected to reach £695million for the first half of this year, compared with £586.5million last year.
While hedge funds made a fortune, others holding long positions made heavy paper losses. BlackRock has a nearly 8 per cent stake and Deutsche Bank 3.5 per cent.
Letko, Brosseau and Associates has 6.1 per cent, and Kiltearn Partners 5 per cent.
Analysts at Cenkos said: ‘The company now looks dangerously holed below the water line.’