Santos move raises eyebrows

Yesterday’s move by Santos to tap the market for $1.5 billion in equity has disappointed some investors who did not expect a raising was on the cards.

Some shareholders are describing the raising as being highly opportunistic on the back of a rallying share price and inconsistent with previous messages offered to the market by management.

Of concern is that their holdings will be diluted, with the transaction being described by some as “not particularly investor friendly and more of a bait and switch”. Others considered it a proactive and decisive move by new CEO Kevin Gallagher to swiftly address the company’s balance sheet challenges and take advantage of the stronger share price.

The trade, executed by Deutsche and Morgan Stanley, involved a $500 million special private placement and a $1.04bn fully underwritten institutional share placement, and the raise overall was an 8 per cent discount to its $4.40 a share closing price.

The company does not need to pay down debt until 2018, but its share price has recently rallied on the back of the election of Donald Trump as US president and a higher oil price.