KPN stock plummets as company to issue new shares
AMSTERDAM (AP) — Investors in Royal KPN NV, the Netherlands' largest telecommunications company, saw the value of their shares drop by more than a fifth Tuesday after it announced plans to issue €4 billion ($5.4 billion) in new shares to cut debt.
The announcement caps a bad year for the company, which posted a fourth-quarter loss of €162 million Tuesday, compared with a net profit of €176 million in the same period last year. Sales fell 3.3 percent to €3.38 billion.
The company's stock fell by more than 20 percent to € 3.21 as investors absorbed the news.
"It's regrettable, but you have to expect it when you make the kind of announcement we have today," said Chief Financial Officer Eric Hageman of the fall in the stock price on a conference call with journalists. "At a certain moment, you have to make a decision about what's best for the company in the long run."
The planned share issue of €4 billion is huge relative to KPN's size, nearly equal to its market value. In a sign of the importance of the offering's success to the KPN's future, top executives abruptly skipped the company's annual press conference planned in Amsterdam, preferring instead to travel to London to woo financial analysts.
The share issue will take form of a "rights issue," in which shareholders are given the first "right" to purchase shares in the new offering. Rights offerings only fail if there is serious doubt about the company's survival or strategic plans. It is not known what Mexican billionaire Carlos Slim — whose America Movil holds a 27.7 percent stake in KPN — plans to do.
KPN's recent round of woes began in 2011, a year in which it still repurchased €1 billion of its own shares and paid a dividend of €0.85 per share. In April of that year, while shares were still trading above €10, the company issued a profit warning, saying customers with smartphones in the Netherlands were ditching KPN's text message and voice offerings en masse for cheaper mobile Internet versions such as Skype and WhatsApp. CEO Eelco Blok announced plans, still ongoing, to lay off 5,000 workers, or about one in six.
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