Eutelsat Shares Stabilize After Capital Increase Sell-Off

Eutelsat's equity is showing tentative signs of stabilization following a severe decline triggered by the announcement of a substantial capital raise. The stock closed Friday's session at €2.18, marking a modest gain of 0.69%. This comes after a precipitous drop of approximately 33% the prior week.

The sell-off was a direct reaction to the satellite operator's rights issue, which aims to raise €670 million. The offering price for new shares was set at just €1.35, representing a discount exceeding 58% to the reference price at the time. This deep discount and the resulting dilution shocked existing shareholders, sending the share price plummeting.

A Shift in Analyst Sentiment

In a notable development last Friday, JPMorgan revised its stance on Eutelsat. Analyst Akhil Dattani upgraded the stock to "Neutral" from a previous lower rating, establishing a new price target of €1.90. While this target sits below the current trading price, the upgrade signals a belief that the risk-reward profile has become more balanced following the sharp correction. The market appears to have now priced in the significant dilution from the capital increase.

Operational Developments and Growth Catalysts

Alongside the financial maneuvering, Eutelsat has announced positive operational steps. The company has secured extensions for key partnership agreements in Latin America and the United Arab Emirates. Furthermore, regulatory developments in India could serve as a future catalyst. The country's proposed "Telecommunications Security Rules 2025" are expected to accelerate the rollout of satellite services, including Eutelsat's OneWeb constellation, once spectrum pricing is finalized.

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

Key factors for investors to monitor this week include:

• Trading volume activity around the €2.00 level
• News regarding spectrum pricing in India from the regulatory authority TRAI
• Ongoing influence of rights trading on price discovery

Financing Strategic Ambitions

The primary purpose of the capital increase is to fund the integration of OneWeb and the expansion of its Low Earth Orbit (LEO) satellite network. As competitors like Starlink continue aggressive expansion, Eutelsat is strengthening its balance sheet to remain competitive in the global satellite broadband race. The company's current market capitalization stands near €1.49 billion.

A Long Road to Recovery

The disparity between the current share price (€2.18), the rights issue price (€1.35), and JPMorgan's target (€1.90) is likely to sustain near-term volatility, with potential arbitrage activity adding pressure.

Although the analyst upgrade may help begin restoring investor confidence, the path to previous highs remains lengthy. The 52-week high of €11.50 seems a distant memory, especially considering the vastly increased number of shares outstanding. Some institutional investors may now view the current price level as having firmer fundamental support. The coming trading sessions will test this assessment.