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Billabong caught in the riptide

Billabong caught in the riptide

Tue June 26, 2012 11:09am

BILLABONG shares have plunged to a record low as battle-weary investors stampede the exit and the group's spectacular fall from grace accelerates.

The surfwear company's share price was almost halved yesterday in the biggest one-day dive since its float 12 years ago.

It was the first trading day since Billabong said last week it was tapping investors for $225 million to pay down debt. Investment experts said the collapse in the group's share price could prompt private equity firms to swoop.

Billabong revealed institutional investors accounting for swathes of shares had snubbed the cash call despite the lure of a deep discount.

The group raised about $155 million from institutions, such as superannuation funds, for a take-up rate of only 79 per cent.

It had offered shares at just $1.02 - a 44 per cent discount to the closing price before the rights issue was announced.

Yesterday, the shares fell below the offer price, tumbling 47.5 per cent to 96c.

Analysts have warned that with household investors unwilling to buy in above market value, underwriters will likely have to stump up as much as $70 million to cover the shortfall. Deutsche Bank and Goldman Sachs are underwriting the capital raising program.

It is the latest bleak development in Billabong's increasingly dramatic fall from favour.

Five years ago, the group's shares were changing hands at more than $18.

Commonwealth Bank retail analyst Andrew McLennan has said the clock is ticking for Billabong, which has a chain of shops and also sells surfwear to other retailers.

"We fear the structural change required may take more time than the company has if it cannot make a material improvement in profitability in the short term," Mr McLennan said.

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