Long-term shareholders must pray Ocado’s latest fundraiser is the last

theguardian.com:

If Ocado’s reasons for tapping shareholders for £575m sound familiar, that’s because they are. Part of the explanation of the need for more cash was identical, word for word, to the description given in June 2020 when the online grocery firm raised £657m in equity plus £350m in debt. The extra money will allow Ocado “to capitalise on the opportunity set over the medium term”, said the statements, then and now.

When will “the medium term” actually arrive? And is it the same “medium term” as was imagined two years ago? Well, there is progress of a sort in that Ocado now offers a rough definition of what it means. In a City presentation last month, it talked about “four to six years” as the “midterm” and said the path led to pre-interest, tax and amortisation earnings of more than £750m, which would be a mighty leap from the £61m reported on the same basis for last year (and which became a thumping loss of £177m at the pre-tax level).

And, yes, one can see how the big leap forward is meant to happen. The pipeline of projects, for which the cash is required, compromises 58 robot-filled warehouses for overseas supermarket chain partners. There were just 10 depots in operation at the end of the last financial year. So, all being well, Ocado should have a very different financial profile in half a decade’s time when it is collecting its contractual cut from getting the warehouses open and operating.

It is hard to believe, though, that Ocado always intended another cash-call of this size at this stage. Last time, the stars aligned as lockdown conditions inflated e-commerce valuations; Ocado was able to issue new equity at £19.60 a share. Now the buzz has faded and the new stock is being printed at a more humble, and dilutive, 795p.