Shares of Chartered Semiconductor (特�?one of the world’s biggest chip foundries, tumbled almost 40 percent in Singapore yesterday as plans for a US$300 million rights issue spooked investors.
Chartered, hammered by the global slowdown, closed at S$0.125 (US$0.08), down from Monday’s close of S$0.205. It briefly hit an intra-day low of S$0.115.
The company said on Monday it would issue 27 new rights shares for every 10 ordinary shares. It said it planned to reduce the number of outstanding shares by consolidating 10 shares into one after the rights issue is completed.
The firm said the cash raised would strengthen its capital position, fund future expenditures and service debts, but worries about the shares being diluted prompted a heavy sell-off, dealers said.
“For US$300 million, the dilution will be crazy,” a local analyst told Dow Jones Newswires, adding that most of the people trading Chartered shares were speculators.
Some analysts said the fund-raising was crucial for the company, even if it comes at the expense of shareholders.
“This fund-raising exercise, in our view, is completely credible and expected, given the limited financing options it has and the deepening losses it is expected to sustain,” OCBC Investment Research’s Kevin Tan said.
Brokerage house DMG cut its call on Chartered to “sell” from “hold” on the bleak outlook for the semiconductor sector this year.
“We believe that current shareholders should offload their shares rather than subscribe to the rights issue,” it said.
Industry trackers Gartner and International Data Corp have slashed projections of global spending on information technology and said computer chip makers could be hit with an unprecedented plunge in revenue.
Brokerage CLSA said Chartered minority shareholders “have two options — be diluted or give Chartered some money to burn.”
Singapore sovereign wealth fund Temasek Holdings, which owns 59 percent of Chartered, has pledged to subscribe to the rights issue in full.
Chartered, which is listed in Singapore and on the NASDAQ in New York, reported a fourth quarter net loss of US$114 million after the global recession weakened demand for semiconductors.
It also said it would cut 600 jobs, bringing the total workforce reduction since the third quarter to about 1,300 positions, or approximately 18 percent of the total.
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