Shares in Thomas Cook rebounded by 51% yesterday as the operator saw positive sentiment from key investors despite concerns about its debts.
Fund manager Invesco, Thomas Cook’s largest shareholder, lifted its stake in the company from 14.2% to 15.2% and dismissed the sharp fall in the company’s share price since a profit warning last week as an “overreaction”.
The shares were given further votes of confidence by Thomas Cook chairman Frank Meysman, who bought £80,400 of shares, and by a string of stockbrokers, which issued positive research notes.
The turnaround in opinion follows the company’s second profit warning in two months which sent the stock tumbling from 48½p to 22¾p over six days of trading.
Thomas Cook has been under pressure since warning last week that trading this year had been worse than expected due to the summer heatwave in the UK and other source markets and that net debt had reached £389 million.
A research note from German broker Berenberg, which suggested that the company was effectively “uninvestable” without “at least £400 million of new equity” compounded the negativity.
Chief executive Peter Fankhauser has strongly played down the prospect of a capital-raising during meetings with the company’s leading shareholders over the past few days, The Times reported.
Meysman helped to stem the share price slump by acquiring up 373,000 shares at a price of about 21½p.
Stephen Anness, global equities fund manager at Invesco, said: “Much of what we heard from Thomas Cook last week was a repeat from what we already knew – that trading suffered from the exceptionally hot summer.
“That was exaggerated by the unexpected change to accounting, a change we very much approve of as it more clearly reflects the underlying business.”
He also played down fears over the group’s debts.
“The market has taken fright, but from what we see the fundamentals remain robust,” Anness said.
“From our conversations with the company, the balance sheet and liquidity is intact. This seems an overreaction.”
A “buy” note yesterday from US investment banking firm Jefferies International backed up Fankhauser’s confidence that the company could avoid a fundraising.
But debt ratings agency Moody’s downgraded its corporate rating on Thomas Cook from B1 to B2 and changed its outlook from “stable” to “negative”.
It said: “Our rating action reflects the deterioration of credit metrics after unfavourable earnings development in the fiscal 2018 and the group’s weakened liquidity.”
Moody’s also cautioned over the impact of Brexit talks, suggesting that uncertainty could lead to later bookings, as happened this summer.
There has also been speculation that Chinese billionaire Guo Guangchang could be eyeing the UK travel firm’s situation, given that conglomerate Fosun International, which is part of his Shanghai-based group, has a 12% stake in Thomas Cook.
Fosun recently won approval from the Hong Kong stock exchange to spin off its tourism and hotels unit that includes Club Med as it seeks to expand its travel business globally.
The company also has a joint venture with Thomas Cook Group in China.
Shares in Thomas Cook closed up 11½p at 34½p.