FirstGroup has received a boost on the same day its shares began trading for the first time without entitlement to its £615m rights issue.
The bus and train group is raising the cash from shareholders to cut its borrowings and to invest in its future growth, with a 3 for 2 rights issue at 85p a share. Investors have until 25 June to decide whether or not to take up their entitlement.
From Monday's close - adjusting for the ex-rights - its shares have added nearly 4% to 103.8p. And Investec has become more positive on the group and has moved its recommendation from hold to add. Analyst John Lawson said:
FirstGroup will shortly put its balance sheet issue to bed (for now) and, whilst the final outcome of the rights issue will not be known for another two weeks, investors should at long last begin to focus on the recovery story (especially in student and UK bus), instead of fretting about the group's finances. If everything goes to plan (the turnaround and the fund raising), then the present share price looks a good entry point. We move to add with an adjusted sum of the parts based target price of 110p.
