NS EasyJet (LSE: EZJ) Stock prices have skyrocketed here and there in the last few weeks. Volatility is expected as the company has made investors think a lot. These include rights issues, transaction renewals, and rejection of takeover bids. Through all of this, should I consider buying easyJet stock now?
Last week, easyJet announced its intention to raise funds to the market. Rights issue.. A rights issue is a fairly easy and common way to raise money through the stock market.
In short, it includes companies that provide existing shareholders with the ability to buy more shares of the company. To make it attractive, new stocks are usually offered at discounted prices. The difference between the current price and the discounted price is known as the value of the right. Investors can accept offers or sell their rights to someone else.
In the case of easyJet, the rights issue is expected to raise £ 1.2 billion, giving existing shareholders the option to buy 31 shares for every 47 shares they already own. This discount is expected to be around 35%.
Theoretically Original right price This is where easyJet stocks should find fair value. However, in reality, this does not always happen and stocks can be traded higher or lower than the theoretical price after the dust has settled.
Other news to digest
What was more interesting to me was the other news that came out. First, I thought the transaction renewal would provide a positive outlook. The company “ Capacity in the fourth quarter of 2021 is about 57% of the level in the fourth quarter of 2019, which is significant compared to the third quarter of 2021 when easyJet flew 17% of the capacity in the third quarter of 2019. Is increasing. “
In fact, in August, the UK’s domestic capacity was 105% of 2019 levels. These notes show that the business is not yet firing on all cylinders, but the trend is positive.
Finally, easyJet shares also had to respond to unilateral takeover bids. No specific mention was made of bidders, but insiders reported that they were from competitors. Wizz Air.. Anyway, it was decided to decline the bid because it underestimated the company. Still, the fact that another company wants to buy easyJet shows that it’s worth it.
Lack of belief in easyJet stock
After all, I don’t think the outlook for easyJet shares has changed radically in the last two weeks. Rights issues allow us to raise more capital and help businesses relieve cash flow pressure during periods of low demand. The latest information on the deal is generally positive, but it didn’t surprise me much. The bid has been rejected and will not affect future share value.
I think easyJet stocks will be a good buy for my long-term portfolio, but it could easily fall further, depending on how winter progresses with Covid-19. Therefore, despite recent fluctuations, I will continue to stand by until the impact of Covid-19 on airlines becomes clearer.
jonathansmith1 does not have a position in any of the companies mentioned. The Motley Fool UK recommends Wizz Air Holdings. The views expressed about the companies mentioned in this article are those of the author and may differ from the official recommendations made by subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, by examining different insights, Better investors than us.
Need to buy easyJet stock after a few weeks of instability?
https://www.fool.co.uk/investing/2021/09/18/should-i-buy-easyjet-shares-following-a-volatile-couple-of-weeks/ Need to buy easyJet stock after a few weeks of instability?