The Sydney Airport [ASX:SYD] share price is down 2.35% today, trading at $5.60 at the time of writing.
Australia’s busiest airport announced the completion of its fully underwritten 1: 5.15 retail entitlement offer.
The decision for a retail entitlement offer was taken as a way for the company to raise equity in what is clearly a very difficult time.
What’s happening at Sydney Airport?
The once fast bustling international transport hub is a ghost town right now.
With the onset of the global pandemic of COVID-19, traffic figures for the airport dropped over 95% in April, leaving the company in a very uncomfortable position.
Being one of the world’s major airports, it needs to keep running irrespective of a pandemic and this takes money.
Usually the money comes from the 42 million-plus people that transit through the airport each year, but with such a dramatic loss in arrivals and departures, the company opted to pursue more cash.
The proceeds from the retail entitlement offer come in at approximately $695 million from issuing 152 million new securities.
Together with the institutional offer completed in August 2020, Sydney Airport has now raised approximately $2 billion.
Sydney Airport Chairman Trevor Gerber said:
‘We would like to thank our securityholders for their continued support. The funds raised will enhance our financial resilience in these challenging times and ensure that we are strongly positioned when the recovery emerges.’
Where to from here for the SYD share price?
There is no official date in sight for the resumption of both domestic and international travel.
The $2 billion in raised funds are welcome and much needed for Sydney Airport right now — but their core business is still in the danger zone.
An airport with no planes coming in and out is just a big, fancy empty building.
In the long run, I believe Sydney Airport will continue to be a very good business and growth stock, as it has been since 2009.
Growing over 635% since then (left chart).
In the short term though, stability may be the best they can hope for, which looks as though they are achieving it.
If the price can continue to move higher it may find some heavy resistance at the $6.20 level, yet should it fall, then the levels of $5.28 and $4.98 may be enough to halt a decline.
I expect the rangebound trading to continue until there is further clarity on when a vaccine will be released in Australia, at the least.
For Money Morning
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