Eutelsat Shares Find a Lifeline After Turbulent Descent

Investors in Eutelsat are breathing a cautious sigh of relief this week. The satellite operator's equity, which plunged dramatically last week, is showing signs of stabilization around the €2.10 mark. This tentative recovery is fueled by a vote of confidence from an unlikely source: the ratings agency Moody's. The critical question for the market now is whether this represents a genuine floor or merely a pause before further volatility.

The immediate catalyst for the improved sentiment was an announcement from Moody's. The agency upgraded Eutelsat's corporate family rating from B2 to Ba3, simultaneously assigning a stable outlook. This move directly responds to the company's recent and substantial financing initiatives. Analysts view the upgrade as a significant positive signal, effectively countering recent fears over the firm's financial health.

The rationale behind Moody's decision is clear. Eutelsat's ongoing capital-raising activities are set to inject approximately €1.5 billion into its coffers. This substantial influx of fresh liquidity dramatically reduces net debt risk and secures funding for pivotal strategic projects, including its investments in the OneWeb constellation and the IRIS² infrastructure program. For now, the specter of potential insolvency appears to have been pushed back.

Stability Comes at a Significant Cost to Existing Shareholders

However, this newfound financial security has been purchased at a steep price for current investors. The capital increase is being executed in phases, with a stark difference in terms. While an initial tranche in late November was subscribed to by anchor shareholders, including the French state, at €4.00 per share, the current phase is far more dilutive.

Should investors sell immediately? Or is it worth buying Eutelsat?

A rights issue now underway, aiming to raise €670 million, offers new shares at a deeply discounted price of just €1.35 each. This massive discount to the previous trading price was the primary driver behind the stock's recent crash. The dilution effect is considerable: for every 11 existing shares, investors are entitled to subscribe for 8 new ones.

Key Data Points at a Glance:

• Rating Action: Upgrade to Ba3 with stable outlook by Moody's.
• Capital Raise: €1.5 billion in total fresh funds.
• Rights Issue Price: New shares available at €1.35.
• State Influence: The French state's stake is set to rise to roughly 30%.
• Critical Date: Rights are tradable until December 5.

Near-Term Upside Likely Capped Until Process Concludes

What does this mean for the share price in the coming days? While the deepened involvement of the French government provides a long-term stability anchor, it also solidifies political influence over the company.

In the short term, simple arbitrage mechanics are expected to dominate trading dynamics. As long as investors can acquire new shares for €1.35 through the rights issue, any substantial rally above that level will likely be met with selling pressure. Traders may seize on any significant price increase to lock in profits. Consequently, shareholders must brace for potentially choppy trading conditions until the capital increase is finalized on December 9.