European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

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Cellnex (CLNX SM): Fundamental Briefing for Those Trading the Current Rights Issue

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Event-Driven

<a href="https://www.smartkarma.com/entities/cellnex-telecom-sau" target="_blank" data-smartkarma-citation="entities:21258:1" rel="noopener">Cellnex Telecom Sau (CLNX SM)</a> has announced a €7 bn capital increase, with preferential subscription rights, in the proportion of 19 new shares for 48 existing shares.
<ul>
<li>
This is the 4th capital increase in two years. Cellnex raised €7.7 bn in the previous ones.
</li>
<li>
Cellnex will issue 192.7 mn new shares at a subscription price of €36.33 per share.
</li>
<li>
The subscription period will begin on 31 March and will last for the next 15 calendar days.
</li>
<li>
All shareholders who have acquired shares up to 31 March and whose transactions have been registered in Iberclear up to 6 April 2021 (both inclusive) shall be granted preferential subscription rights.
</li>
</ul>
Cellnex should have the support of the market. This rights issue is not due to solvency problems. The company is buying assets at c. 11x EV/EBITDA and its shares trading at 17.2x EV/21e EBITDA. Share price weakness over the last months could be explained by the market discounting this huge rights issue.
<div>
Cellnex had already announced its intention to increase capital by €7 bn in February, in order to finance new acquisitions. The issue price of the new shares is in line with market expectations, hence the low impact on the share price on 30 March.
Cellnex presents solid fundamentals, an upside potential of over 27%, good long-term growth prospects (see Capital IQ consensus above, turning EPS positive in 2022 and maybe even in 2021) and CF profitability of more than 7.7% as of 2022 (Capital IQ consensus).
In addition, the capital increase will allow the company to continue buying assets worth another €11 bn in the next 18 months and generating economies of scale. Although, it should have a practically zero impact on valuation.
Regarding rights trading, it may happen as in previous large rights issues:
<ul style="list-style-type: circle;">
<li>On the first hour of the first day of rights trading (i.e. 1 April), existing shorts (on the shares) have to deliver the rights to the borrowers, for that doing they either will have to buy the rights (presumably not many available for sale) or buy back shares at the request of corporate brokers. A pop in the shares and the rights may be expected. Some smart funds (passive funds for instance) may sell their rights at that point and buy shares in the market to avoid dilution.</li>
<li>It often happens when there is a large delivery of rights, the market is not completely ready: folks have to cover their shorts faster than existing sellers of rights could sell, and the only way to hedge market movement is by buying shares.</li>
</ul>
(See further in the Insight for terms).
</div>

Cellnex Telecom Sau (CLNX SM) has announced a €7 bn capital increase, with preferential subscription rights, in the proportion of 19 new shares for 48 existing shares.


This is the 4th capital increase in two years. Cellnex raised €7.7 bn in the previous ones.


Cellnex will issue 192.7 mn new shares at a subscription price of €36.33 per share.


The subscription period will begin on 31 March and will last for the next 15 calendar days.


All shareholders who have acquired shares up to 31 March and whose transactions have been registered in Iberclear up to 6 April 2021 (both inclusive) shall be granted preferential subscription rights.


Cellnex should have the support of the market. This rights issue is not due to solvency problems. The company is buying assets at c. 11x EV/EBITDA and its shares trading at 17.2x EV/21e EBITDA. Share price weakness over the last months could be explained by the market discounting this huge rights issue.

Cellnex had already announced its intention to increase capital by €7 bn in February, in order to finance new acquisitions. The issue price of the new shares is in line with market expectations, hence the low impact on the share price on 30 March.
Cellnex presents solid fundamentals, an upside potential of over 27%, good long-term growth prospects (see Capital IQ consensus above, turning EPS positive in 2022 and maybe even in 2021) and CF profitability of more than 7.7% as of 2022 (Capital IQ consensus).
In addition, the capital increase will allow the company to continue buying assets worth another €11 bn in the next 18 months and generating economies of scale. Although, it should have a practically zero impact on valuation.
Regarding rights trading, it may happen as in previous large rights issues:

On the first hour of the first day of rights trading (i.e. 1 April), existing shorts (on the shares) have to deliver the rights to the borrowers, for that doing they either will have to buy the rights (presumably not many available for sale) or buy back shares at the request of corporate brokers. A pop in the shares and the rights may be expected. Some smart funds (passive funds for instance) may sell their rights at that point and buy shares in the market to avoid dilution.
It often happens when there is a large delivery of rights, the market is not completely ready: folks have to cover their shorts faster than existing sellers of rights could sell, and the only way to hedge market movement is by buying shares.

(See further in the Insight for terms).


Cellnex Telecom Sau

Cellnex: Serial Rights Issuer