May 22, 2019

This is not an M&S rights issue, this is a Lidl rights issue

The 325m new shares in its 1-for-5 rights issue are being offered at 185p, a 26 per cent discount to the theoretical ex-rights, ex-dividend price. News of the fundraising alongside a 3 per cent decline in group revenues, as clothing and home like-for-likes also fell 1.6 per cent, was met with a 7 per cent drop in M&S's shares. Liberum's indicative calculations suggest the rights issue could be about 15 per cent dilutive to estimated full-year 2020-21 earnings per share. Dividends per share have already been cut: M&S is reducing its payouts by 40 per cent to maintain a strong balance sheet. Of course, a discounted rights issue to fund a big acquisition is not unusual - and M&S's discount is actually less than the 35 per cent offered by Restaurant Group to raise £315m to buy Wagamama, and the 34 per cent offered by Cineworld when raising £1.7bn for Regal.

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