CBA $5b raising looks shaky as share price hits intraday low

ONE of the nation’s biggest capital raisings risks becoming a fizzer, analysts say, with Commonwealth Bank shares yesterday sliding below the price offered to retail investors in its $5 billion rights issue as global share markets totter.

CBA shares hit an intraday low of $71.26, below the $71.50 offer price lobbed last month, before rebounding in line with the broader market to close at $72.15.

Australia’s top lender by market value is just a bad trading day away from placing its cash drive in jeopardy, with the underwriters of the remaining $2.9 billion offer – investment banks Morgan Stanley and UBS – faced with a potentially hefty bill after committing to soak up any shortfall when the offer closes at 5pm on Tuesday.

Goldman Sachs is in the same boat, albeit to a much smaller degree, as the underwriter to department store Myer’s poorly received $221 million raising announced earlier this week.

Myer, which offered shareholders two new shares for every five held at 94¢ a share while also tabling a 70 per cent slide in net profit for 2014-15, saw its shares plunge more than 20 per cent to an all-time low of 90¢ days after the announcement.

For CBA, such a slump in its share price would have seemed unthinkable when it launched its bumper offer on August 12, with the one-for-23 deal priced at a 10.5 per cent discount to its then $82.12 share price.

Since then, investors have been swamped by bad news, spooked by signs that China’s slowdown could prove longlasting and that its government appears to have run out of ideas on how to arrest a destabilising share market rout.

Domestic data did little to restore confidence this week, with the latest growth and consumer spending figures both undershooting expectations.

America was last night set to provide the next flashpoint for global markets, with investors ready to pounce on any weakness in the August jobs figures.

Australia’s benchmark ASX 200 closed up 0.3 per cent yesterday at 5040.6 points, but has lost almost 8 per cent since CBA lobbed its offer.

Australia’s biggest lenders have been hit with the challenge of finding more funds to meet stricter capital reserve rules after the banking regulator, the Australian Prudential Regulation Authority, said in July an additional $28 billion would likely need to be sourced.

Options-Xpress analyst Ben le Brun said CBA had consistently traded at a premium to other international banks but was now being dragged back.