Shopping centres owner Intu is now feeling this pain as it abandons plans to raise at least £1 billion on the stock market.
Russ Mould, investment director at AJ Bell: “The global markets sell-off is bad for more than just investors who may have seen a decline in their value of their portfolio. It is also negative for companies trying to raise money as institutional investors will be very cautious towards putting cash into new stock when there is so much uncertainty over whether we’ve seen the worst of the market fall.
“Sentiment was already weak towards the business thanks to ongoing woes in the retail market and falling retail property valuations. Therefore Intu’s equity raise was always going to be a tough one, potentially resulting in new shares being issued at a very large discount to the market price as a way of compensating investors for the risks they would be taking on.
“The fact that the equity raise has been scrapped altogether leaves Intu in a very difficult situation. There is no solid plan B and so the market will now be asking big questions as to how Intu might be able to crawl out from under the significant weight of its £4.5 billion net debt position.
“Intu’s only plausible solution is to sell more assets but that may simply tide it over temporarily rather than create a long-lasting fix to its sticky situation. Its future is looking far from bright.”