Shares in UK online grocer Ocado fell after it raised £1bn through a combined equity and bond issue to take advantage of the surge in digital shopping caused by the coronavirus pandemic.
The company said on Thursday it raised £657m through an equity issue to retail investors and another £350m in convertible corporate bonds due in 2027.
The Hatfield-based firm said the move gives it “the flexibility to move at increased pace” as more people become used to shopping on online platforms.
Following the latest raise, Ocado, led by co-founder and chief executive Tim Steiner, said it has access to around £2.2bn of cash and cash equivalents.
Shares of Ocado (OCDO) ended the day down 5.7% in London, with the stock trading at 1,960p , as the newly issued shares entered the market with a price lower than the market value of the shares at the moment.
Ocado, launched in 2000, has seen its shares nearly doubled over the last three months, giving it a stock market capitalisation of £14bn – more than the combined market value of Sainsbury – Britain’s second-biggest supermarket group by sales – Morrisons, the fourth biggest, and Marks & Spencer.
Ocado justified this extra injection of cash by saying that consumers are now more inclined to shop for groceries online, adding that the penetration of online sales has doubled in recent months as lockdown measures prompted buyers to buy essential goods online.
The retailer saw its losses jump in February as it posted an annual pre-tax loss of £214m as it stepped up investment, almost five times as much as its £44m loss 12 months ago.
“For now, the company’s valuation appears based on the hope that its revenues will grow exponentially as the world’s supermarkets do more of their everyday business online”, said Michael Hewson, an analyst at CMC Markets.
However, Hewson added that the company has “spent an awful lot of money and it’s still not profitable”.