Peugeot shares plunge amid rumors of capital increase
By Jean Baptiste Oubrier, AFPPARIS--Shares of French auto group PSA Peugeot Citroen plunged early on Monday on rumors that the struggling company will raise new capital, and amid talk it might tie up with a Chinese firm.
October 15, 2013, 12:08 am TWN
The shares dived 9.42 percent to 11.20 euros in response to media reports of a capital increase, and in an overall market which was down 0.16 percent, as measured by the CAC 40 index.
The group, a top name in French industry, is in trouble and struggling to carry through a deep restructuring with job cuts and a plant closure.
Meanwhile the socialist-led government has made raising the competitive position and rejuvenation of French industry a key policy plank, together with reducing high unemployment and promoting the “made in France” label.
The company has already linked with U.S. auto giant General Motors in an attempt to develop a new business strategy. A government-commissioned report found that PSA was in deep trouble because of decades of strategic mistakes, mainly because it had not made the most of globalization.
PSA Peugeot Citroen has already, in effect, been rescued by means of French state support for its credit arm. The latest rumors suggest a new total cash injection of 3.0 billion euros (US$4.0 billion).
PSA has not said that it will raise capital, repeating merely that it was in negotiations with “different partners,” but also said that none of the projects had “got to a mature stage at this point.”
Media reports suggest that Chinese company Dongfeng and the French state could each subscribe to 1.5 billion euros-worth of shares in PSA.
Such an increase in the number of shares on issue would dilute the holdings of existing shareholders, and this has caused the price of PSA shares to fall.
One stock analyst in Paris, who declined to be named, commented: “Given the risk of such a big dilution without the creation of any extra value, we continue to think that we shall stand aside from the shares.”