Whe bought shares in the energy company Uniper last winter has had a difficult few months. From the share price of a good 40 euros back then, there are only 4 euros left today. The company’s high dependence on Russian gas has made the Eon spin-off a sleazy child on the German stock exchange – and one of the biggest price losers as a result of the war of aggression in Ukraine.
Now the state is apparently planning to significantly increase its stake of 30 percent, which it initiated in July. Talks for a majority stake have been confirmed. The company would effectively be nationalized. What does that mean for the remaining shareholders?
The verdict of the stock exchange was clear: When the considerations became known on Wednesday, the share price plummeted again by 17 percent. In early trading on Thursday, the stock briefly rose more than 7 percent. But as the day progressed, the price then fell back to the 4 euros of the previous day. For most market participants it seems clear: For the foreseeable future, the risks in the share far outweigh the opportunities. A further capital increase would immediately further dilute the share price, because any profits would in any case be distributed over more shares.
What does nationalization bring?
And if the state proceeds again with the new capital increase as it did with Lufthansa and only buys the shares at par, then Uniper would not put any significant new money into the coffers. The ratio would probably be that the federal government, as the main shareholder, would significantly improve Uniper’s ratings – and in the business with futures contracts, the counterparty’s confidence in the future viability of a company is the be-all and end-all.
“Should the state increase its stake in Uniper to more than 50 percent, it should make that the par value of the share again,” explains Guido Hoymann, who analyzes Uniper shares for Bankhaus Metzler. “It’s 1.70 euros, well below the current stock market price.” The state has learned something new here since the banking crisis, when it entered Commerzbank at prices at market level. But for the existing shareholders this is of course not a good prospect.
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For detailed view
Analyst Vincent Ayral from the American bank JP Morgan was disappointed by the prospect of an increase in state participation. It is not surprising that the utility and the federal government are looking for renewed stabilization measures, he wrote in a study published on Thursday. However, he was amazed at the idea of an equity increase, including the resulting significant majority of the federal government. When the federal government concluded its first stabilization pact with the company in July, it would have said that further economic dilution of Uniper shareholders should be avoided.
Two ways to gain
For shareholders, there are basically two ways to achieve price gains with the share, both of which are highly speculative. One would be that Russia would normalize its gas supplies again, causing market prices to fall again quickly. There is speculation on the financial market that Uniper could lose up to 120 million euros a day to fulfill its own long-term supply contracts after the almost complete absence of Russian gas supplies. However, an easing of tension on the gas market is only to be expected after a change in the political situation in Moscow.
The other possibility for price gains for investors is that the federal government could also take over Uniper completely and take it off the stock exchange after a majority stake. In this way, the federal government would then get rid of the previous major shareholder Fortum, behind which the Finnish state stands, which can then have a say in all important decisions.
Hoymann from Bankhaus Metzler outlines this scenario as follows: “After such a capital increase, the federal government could decide to delist the company from the stock exchange and would have to pay the remaining shareholders the average price of the past six months.” Instead of the current 4 euros, a Price to be paid around 10 euros. However, it is unclear whether the state plans to do so and if so, when it would make such an offer and at what price. Hoymann advises against such speculation: “As an investor, I wouldn’t bet on a higher price than the current price being paid.”
Such an approach could bring advantages for Fortum, as the American analysis house Bernstein Research points out. After the takeover plans became known, analyst Deepa Venkateswaran left the shares of the Finnish energy group at “Outperform” with a target price of EUR 15.
