FTSE struggles to find direction and Intu’s shares slump after scrapping £1bn fundraise

“The UK market struggled to find direction on Wednesday with the index hovering around the 6,730 level, just above last night’s closing price,” says Russ Mould, Investment Director at AJ Bell.

“Yesterday’s US interest rate cut from the Federal Reserve wasn’t deemed enough to help avoid a recession and so investors remain very nervous.

“Wall Street experienced a new sell-off on Tuesday with the S&P 500 down 2.8% and the Nasdaq falling just shy of 3%.

“Markets are really worried about how the coronavirus disruption will affect corporate earnings, consumer spending and ultimately economic growth.

“A lot of precautionary measures are being put into place such as more people working from home, yet there are concerns about how that will affect productivity and spending."

Intu

“The global markets sell-off is bad for more than just investors who may have seen a decline in their value of their portfolio. It is also negative for companies trying to raise money as institutional investors will be very cautious towards putting cash into new stock when there is so much uncertainty over whether we’ve seen the worst of the market fall.

“Shopping centres owner Intu is now feeling this pain as it abandons plans to raise at least £1 billion on the stock market.

“Sentiment was already weak towards the business thanks to ongoing woes in the retail market and falling retail property valuations. Therefore Intu’s equity raise was always going to be a tough one, potentially resulting in new shares being issued at a very large discount to the market price as a way of compensating investors for the risks they would be taking on.

“The fact that the equity raise has been scrapped altogether leaves Intu in a very difficult situation. There is no solid plan B and so the market will now be asking big questions as to how Intu might be able to crawl out from under the significant weight of its £4.5 billion net debt position.

“Intu’s only plausible solution is to sell more assets but that may simply tide it over temporarily rather than create a long-lasting fix to its sticky situation. Its future is looking far from bright.”

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