Dubai
Share prices of contractor Drake and Scull International (DSI) plunged nearly 10 per cent on Wednesday, continuing to nose-dive, days after the company’s annual general assembly where shareholders proposed raising capital.
DSI, which was the third most actively traded stock on the Dubai bourse in terms of volume, ended 9.4 per cent lower, nearing the daily cap of a price drop of 10 per cent.
Share prices closed at Dh1.35, the lowest closing price since late May 2017 when they also ended at Dh1.35. In the past four sessions alone, DSI share prices have fallen more than 20 per cent.
The decline comes after DSI held its annual meeting on Monday, during which a number of shareholders with more than 10 per cent of the company’s capital proposed discussing an increase in the company’s capital by Dh500 million.
Shareholders suggested that increase be done by issuing new shares, whose minimum value is Dh1.25 or by issuing convertible bonds. DSI said that it would still need to obtain regulatory approval, but that its board of directors will discuss the matter.
Issuing new shares or convertible bonds would dilute the value of the existing listed shares.
“The rights issue was part of the original plan when Tabarak came in as a strategic investor. The reaction on stock price was long overdue to reflect the dilution for minority investors post right issue,” said Sanat Sachar, equity research analyst at Al Mal Capital.
“In addition, investors were expecting development over receivables in Saudi and debt restructuring with banks, which didn’t materialise.”
DSI has been grappling with financial losses and is in the midst of negotiations to refinance its bonds as the company was forced to deal with a slowdown in the construction sector on the back of slower economic growth.
