AMS-OSRAM Plans to Raise Over €2 Billion to Strengthen Financial Position

Ams-OSRAM, the Austria-based sensor manufacturer, has announced its plans to raise over €2 billion ($2.1 billion) in an effort to improve its financial standing. The company, which has been facing challenges due to increased competition in the automotive sector and declining smartphone sales, aims to bolster its balance sheet and address its heavy debt burden.

Capital Increase and Bond Sales

In order to secure funds, Ams-OSRAM plans to raise €800 million through a capital increase. Additionally, the company intends to generate another €800 million by selling bonds. These measures will help provide a much-needed boost to their financial position.

Asset Sale and Debt Instruments

Ams-OSRAM will also leverage alternative methods to strengthen its balance sheet. The company aims to raise approximately €300 million by selling and leasing back certain assets. Furthermore, it plans to secure an additional €350 million through unsecured notes, bilateral debt facilities, and other instruments.

Investor Reaction and Market Performance

Investors received news of Ams-OSRAM's fundraising plans unfavorably, leading to a significant decline in its Swiss-traded shares. At one point, the stock plummeted more than 28%. Juergen Wagner, an analyst at Stifel, noted that the magnitude of the rights issue was a negative surprise to investors, as it amounted to approximately 50% of the company's current market capitalization.

European Stock Markets

While Ams-OSRAM faced significant challenges, the overall performance of European stock markets on Thursday was mixed. Germany's DAX remained flat, while France's CAC 40 saw a 0.3% gain due to improved performance in luxury and energy sectors. The U.K.'s FTSE 100, however, experienced a 0.3% decline as real estate and other interest rate-sensitive sectors continued to face setbacks.

In summary, Ams-OSRAM's plan to raise more than €2 billion aims to fortify its financial position and address its heavy debt burden. While the announcement led to a significant drop in investor confidence, the impact on European stock markets varied across different countries and sectors.

Hennes & Mauritz Faces Downgrade Amid Concerns

Shares of Hennes & Mauritz, the Swedish fashion retailer, experienced a nearly 4% drop following a downgrade from buy to hold by a research team at Deutsche Bank.

Mixed Performance Raises Debate

While H&M delivered a small earnings beat in the third quarter, the research team at Deutsche Bank found the mix between sales, gross margin, and cost management less compelling than expected. This has sparked a debate about the company's financial outlook.

Deutsche Bank expressed hesitation in having confidence in a strong macro outlook and believes that the assumed self-help measures at H&M are already well accounted for in the share price. Consequently, Deutsche Bank lowered its price target from 195 Swedish krona to 175.

Diageo Struggles Amid Cost Pressures and Economic Headwinds

Shares in Diageo, the maker of popular brands such as Johnnie Walker and Guinness, remained close to their lowest point since April 2021. The company affirmed its full-year guidance but warned of increasing cost pressures and signs of economic headwinds.

Concerns Overshadowing Strong Performance in Other Markets

According to Andrea Pistacchi, an analyst at Bank of America, concerns about Diageo's U.S. business have hindered its overall performance this year. Nevertheless, trading in Europe and the Asia/Pacific region has remained robust. Pistacchi suggests that today's trading update provides some reassurance and anticipates growth acceleration in the second half of the year, which could support a re-rating of Diageo shares.

Pistacchi reiterates their buy recommendation for Diageo shares with a target of 3,600p.

Euro and Pound Recover Against Dollar

In forex markets, both the euro and pound rebounded approximately 0.5% after technical indicators indicated that they had reached sharply oversold conditions versus the dollar on Wednesday.