Shares in Italy's Saipem fell as much as 40% on Tuesday after investors subscribed for only 70% of its 2 billion euro cash call, signaling limited confidence in the turnaround plan for the Italian energy services group.
Saipem said on Monday it had raised around 1.395 billion euros ($1.4 billion) at the closing of a hyper-dilutive capital increase launched last month as part of a plan to try to stabilise its finances and refocus its business after a surprise profit warning in January.
A pool of banks has pledged to mop up any unexercised rights to guarantee the full amount of the capital increase is covered.
A Milan-based trader said unexercised rights were probably more than banks expected, with a likely overhang of shares they will try to place on the market.
"Neither institutional investors nor retail ones seem to be really confident in the group's turnaround," he added, raising the prospect of the company being delisted at some point.
Under a new plan presented in March the company, controlled by energy group Eni and Italy's state lender CDP, has promised to cut costs and focus more on its legacy offshore engineering and construction(E&C) business where it expects annual growth of 8%, especially in the Middle East and Africa.
Saipem will offer unexercised rights on the Italian stock exchange on Tuesday and Wednesday, with the subscription of the relevant shares to be completed by 1200 GMT on Thursday.
Bestinver analyst Marco Opipari said in a report on Tuesday he expected Saipem's market price would "converge towards the subscription value".
Saipem offered its new shares at an issue price of 1.013 euros each, at a ratio of 95 new shares for every one ordinary or savings share held.
By 1010 GMT shares were down 32% to 2.541 euros.
The stock had been trading above the subscription price throughout the offer period due to the structure of the capital increase, which made it impossible for investors to short it.
Between Saipem's profit warning in January and an adjusted all-time low hit at the end of June of 0.7583 euros, shares in the company lost around 75% of their value.
($1 = 0.9996 euros)
(Reuters - Reporting by Giulio Piovaccari; additional reporting by Claudia CristoferiEditing by Keith Weir)