WeBuyCars stock sinks as major share issuance triggers investor sell-off
WeBuyCars raised capital ahead of its April 11 listing on the JSE Main Board, incurring once-off listing expenses of R45 million in professional, legal and JSE fees.
Image: Freepik
After issuing 83 million more shares – diluting investors’ share of the cake – WeBuyCars saw its stock fall as much as 14% on Tuesday.
It remained under pressure by late morning, down another 1.33% to R4.45. The stock has dropped 18.71% over the past five days.
WeBuyCars issued the additional shares between February and April 2024 to fund its JSE listing.
Earlier this week, it said the move will weigh on earnings for the year to September.
Even though the company’s performance remains strong, issuing extra shares means profits now have to be divided among more shareholders.
That leaves each investor with a slightly smaller portion of the company’s overall earnings, even if the company decides to retain the cash.
Despite the dilution, WeBuyCars expects basic earnings to more than double to between R926.8 million and R944 million from R343.1 million the previous year.
Headline earnings are forecast at R929 million to R946.2 million, also more than double from R343.9 million.
It said on Tuesday that core headline earnings, which exclude once-off items, are expected to be between 12% and 17% higher year-on-year.
However, core headline earnings per share (HEPS) are projected to rise only slightly, to between 219.2 cents and 230.1 cents, compared with 217.4 cents last year.
HEPS shows how much profit a company makes for each share after removing once-off items like asset sales or write-offs.
It’s a measure of how well the company’s core business is performing.
If you own shares, HEPS tells you roughly how much of the company’s profit belongs to you for each share you hold.
When the company issues more shares, the same total profit gets divided among more people – so HEPS can fall even if overall profits rise.
And if the company doesn’t pay a dividend, it keeps those profits to reinvest instead of paying them out to shareholders.
WeBuyCars raised capital ahead of its April 11 listing on the JSE Main Board, incurring once-off listing expenses of R45 million in professional, legal and JSE fees.
The company said its full-year results, to be released on a date still to be announced, will provide further details on its operations, strategy and performance drivers.
IOL Business