Royal & SunAlliance has priced its £300m share placing at 161p a share, a 4 per cent discount to yesterday’s close. That is not a bad job considering the shares being issued represent about 6 per cent of the UK insurer’s market value.
RSA stock is pretty sensitive to any kind of shock. Remember the 10 per cent slide that followed March’s annual results? And as Collins Stewart points out in a note to clients, RSA’s history of tapping investors means it is unsurprising that the market might be “distinctly underwhelmed” by the placing. In 2003, it launched a £1bn rights issue three years after handing back £750m to shareholders.
Against that backdrop, news of today’s placing - which is to fund buying out minorities in Denmark’s Codan – could easily have hit RSA’s share price harder.
So candy bars all round for the folks at JP Morgan Cazenove and Merrill Lynch who advised on the placing. They have spotted a window of opportunity to tap investors when the shares were close to their recent five-year high.
The question is whether they have mopped up the market’s entire pent-up demand for RSA stock. If they have, some traders say you should not expect the shares to travel much higher than 161p for the rest of the year.