PSA Shares A Tough Sell, Offered At Deep Discount
PSA Peugeot Citroen doesn’t just have problems selling its cars lately. It also has problems selling its stock. To move the paper, a tried and true tactic is employed: Cash on the … where do you put the cash when you sell shares at a fire sale deep discount?
PSA is doing a €1 billion ($1.3 billion) rights issue to fund an alliance with General Motors. The announcement prompted a Moody’s downgrade. The new shares appear to be a hard sell.
PSA said today it would offer 16 new shares for every 31 shares currently held by investors at 8.27 euros apiece. This would be “a 42 percent discount to its closing stock price on Monday,“ says Reuters. Actually, the stock had dropped after the announcement of the GM alliance. Compared to a few days ago, we are looking at a 50 percent discount. Everything has its price.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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If they don't have the cash to hold up their end of the GM partnership, where's the cash on the hood going to come from, assuming they had a hood to put it on? Did GM just tie itself up to an anchor?
Finally, an investment opportunity attractive enough to get me out of my long position in Greek bonds!
I would not underestimate PSA (Peugeot/Citroen). Currently, e.g. MINI/BMW, Jaguar, Ford are successfully using PSA-based engines. From an engineering point of view they are top-notch (Diesel hybrids, for example). No need to delve into the history of those companies, which is pretty rich. What they got wrong is their export policy, as compared to Volkswagen group, for example. Too late, too little, in China. No presence, at all, in the US, etc. Their product spectrum is (traditionally) too European.
GM - destroyer of brands, stocks and secured bond holders - I bless your taking over PSA and putting it to the final rest. PSA RIP, US taxpayers are with you. We will never forget.