It amazes me not sometimes but all the time why would people contemplate buying into stocks that already have known controversy... as if there are no other better stocks to buy.
Remember Blue Sky Alternative? Remember BIG? Gone!
WTC, BUD, ISX still around....as is Retail Group.
The next time you hear your stock is being highlighted due to a controversy, the first thing not to do is becoming defensive and labeling as contentious, because it does not care what you think, the perception is all that counts.....a tainted stock will never regain its former glory.
I had cautioned BIG holders before and after suspension as I did with BUD, but most were too involved (some into large hundreds of thousands) to want to be objective about the concerns and take a reality check. Continued denial ended in ruins. Goldman Sachs runs numbers on Freedom Foods, drops conviction Sarah Thompson, Anthony Macdonald and Tim Boyd AFR
Jul 2, 2020 – 11.59am
Embattled cereals, snacks and dairy company Freedom Foods rocketed to the top of equity raising watchlists last week when it announced a $60 million inventory write-down and its CEO and CFO left the building.
Talk about a triple whammy for shareholders.
Analysts at Goldman Sachs have modelled what a $150 million equity raising would mean for shareholders, who are already bracing for the stock to tank once PwC and Ashurst finish an investigation into Freedom's finances and it resumes trading.
Goldman Sachs has crunched the numbers on a Freedom Foods equity raising.
In a note to clients on Thursday, the analysts said earnings per share could drop by between 18 per cent and 27 per cent depending on how deeply discounted the offer was.
The analysts said a $150 million equity raising would reduce Freedom's net debt to EBITDA to 2.5 times by December 2020. Without a raising, Goldman Sachs thinks Freedom's net debt to EBITDA would peak at 4.9 times in December 2020, before gradually falling to 2.3 times by June 2022.
Freedom has not disclosed its debt covenants to the market but the analysts estimated that it would be somewhere around 3 times on a net debt to EBITDA basis, based on the company's Australian and New Zealand peers.
Goldman Sachs noted that it did not "incorporate an equity raising into our numbers at this stage, although we highlight this as a key risk" and said its equity raising modelling was for "illustrative purposes only".
A potential equity raising is just another thing for Freedom Foods to consider. There's also matters including the PwC/Ashurt investigation targeting the company's financial position, the FY20 results and the appointment of a new CEO and CFO.
In the meantime, the analysts removed Freedom Foods from the team's conviction list and downgraded the stock to "neutral".
