Shares of Peugeot Citroen the French automaker dropped by another 11.6% on Friday making a four day fall of 23%, after General Motors its alliance partner in the U.S. sold its stake before the possible new issue of shares by the struggling carmaker.
The stake of 7% that totaled over 24.8 million shares was sold for 10 euros each in a private sale with institutional investors, at the bottom of the range of 10 to 10.25 euros and at a discount of 5.9% to the closing price on Thursday.
On Thursday, shares of Peugeot lost 7% after the French automaker unveiled a write down of 1.1 billion euros at its overseas operations that are ailing and confirmed it would pursue a tie in with Dongfeng Motor Group from China, which would by supported by a share issue.
Analysts at Goldman Sachs removed the French automaker from their conviction buy list in pan-Europe on Friday. Goldman cited a higher risk of dilution. The broker however kept the shares at a buy rating, but cut its price target from 16.4 euros to 12.1.
On Thursday, Peugeot said its discussions with Dongfeng had only reached the preliminary stage, with there being no guarantee they would even conclude successfully.
However, a source that is familiar with the situation said the automaker’s board of directors had agreed Tuesday to go ahead with final negotiations on the outline deal that would see the government of France and the China automaker take equal 20% stakes in the automaker, with a new share issue at less than 7 euros per share.
On Friday when asked if the French government would participate in the potential increase in capital at Peugeot, Arnaud Montebourg, the Industry Minister said he could not answer the question. However, he did say that question would eventually rise, but at this point, the companies are discussing things amongst themselves.
Without explaining any specifics, the Minister said the government could sell its state holdings in companies and invest in others. He did say the red line is that Peugeot remains a French company.
