TalkTalk attacked by City over cash call to pay debts as ultrafast broadband battle heats up
TalkTalk was accused of “blatant disregard” of City guidelines after it was forced to seek a £200m cash injection to pay down heavy debts.
The Investment Association (IA), which represents most of Britain’s biggest investors, attacked the operator for raising the money via a share placing without the approval of existing shareholders. TalkTalk placed new shares equivalent to a fifth of its stock market value, in breach of industry guidelines that set the limit at a tenth.
A spokesman for the IA said TalkTalk had violated shareholder rights that are “a vital shareholder protection and their misuse poses a serious threat to shareholder and investors’ interests – the UK’s pensioners and savers”.
“Businesses have a duty to listen to their shareholders and this placing sets a very damaging precedent for market practices.”
TalkTalk carried out the placing of new equity alongside a stinging profit warning and its second dividend cut in less than a year.
The company’s shares sank to a record low on the latest in a series of downgrades but chairman Sir Charles Dunstone, who reassumed executive responsibilities last year, was defiant.
He said: “We’ve had one reset and it ended today. You talk to analysts and people who view the whole world through Excel but in nine months we’ve achieved a phenomenal amount and we’re growing. We’re now fixing the balance sheet.”