Investing.com - On a day that the rest of the market was resting after another head-spinning rally starting in December, IWG shares dropped more than 7% as the office rental company tried to seize buying opportunities created by the pandemic.
The IWG, whose long-term outlook has already improved dramatically following the collapse of its rival WeWork last year, said Wednesday it will raise about £ 300m in convertible bonds to seize opportunities in the US, Europe, the UK and Asia, betting on that city offices (and equally suburban offices) will have a bright future when the coronavirus recedes.
This is a clear change in tone following the third quarter results released just a couple of weeks ago, when topics such as rationalization, rent deferrals and provisions dominated the news. As of September, the company's sales are down 13% in constant currency and the occupancy rate has dropped more than 4 percentage points to 70.5%.
Even then, there were indications that the IWG would happily weather the crisis by making it to a net cash position. But Wednesday's announcement was a different matter. It was a step by a company that knows that deals are now available that may not be available for a very long time..
The IWG has already started buying real estate, in particular from WeWork itself. Last week, it occupied 79,000 square feet of the former WeWork office in Williamsburg, located directly across the East River from Manhattan. She also acquired another WeWork office in Hong Kong.
The circulation period of the bonds being placed is five years with a coupon from 0.5% to 1.25%. The initial conversion price is expected to be set at a premium of 35% to 40%, which guarantees the company's founder, Mark Dixon, the owner of the shares underlying the conversion option, a price equivalent to what they were trading at prior to the pandemic..
Skeptics may view the move as a sell-off by the company's largest shareholder. The company will argue that its priority was to keep debt manageable in a very uncertain environment, and having achieved success, it does not want to negate good work by issuing simple debt obligations..
In any case, stocks that were on the brink before the pandemic have so far recovered only half of their losses since February. This only reinforces the company's optimism..
By Jeffrey Smith
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