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@chilting,

Imo theres much worse to come re macroeconomic conditions for Ocado. Which is why they placed shares now. Going forward we will see the share price dip lower..

As outlined in my earlier post there is no mention in the RNS of the obvious factors that are pushing Ocado to raise funds now. Rapidly rising interest rates, red hot inflation across all sectors, decreasing sales at Ocado retail.

The placement had come on the day Fitch ratings downgraded Ocados credit rating. Only a small number of the Ocado management team participated in the placing, why didn't the rest want to be part of it?

The timing of the placing suggests the Ocado management do not see the Ocado share price going much higher in the short term. If they did they would behave held off and held the placing then.

Some of the biggest Ocado investors have just sold £220m worth of shares. They are not confident..

https://www.proactiveinvestors.co.uk/companies/news/985356/ocado-investors-sell-stock-as-online-grocer-raises-quick-fire-578mln-985356.html

Extract from guardian article..

https://www.theguardian.com/business/2022/jun/20/ocado-aims-to-raise-575m-from-investors-to-fund-tech-arm-expansion

"The online delivery specialist’s plan was announced late on Monday but came as Fitch downgraded its credit rating to negative from stable. The ratings agency said it would take longer than expected for Ocado’s business building hi-tech warehouses for overseas retailers to become profitable.

Our rating reflects the growing scale, upfront investments and execution risks associated with the progress on 40 of its international [distribution centres] over the next four years,” Fitch said in a note.

Fitch said the pressure on profits would be temporary but short-term profit margins would take a hit from customers spending less per order amid the increasing cost of living and higher labour, marketing and energy costs.

The rationale for the placing as outlined bin the RNS is to quicken CFC build etc etc. There's no mention of the elephants in the room which surely have contributed greatly as to why Ocado is to raise further funds now -

Honest reasons for the fundraise:

1 - Interest rates are going up at at astonishingly quick rate so it will be very expensive to borrow later this year. Best tap the market now.

2 - Costs on everything are rising very, very fast due to worldwide high inflation. Ocado need more cash to pay the rising bills

3 - Ocado retail sales are falling. (There have been 2 profit downgrades this year). Ocados revenue stream from their retail arm is less than anticipated so there's a need to raise further funds now.

Well this fundraise is occurring a lot earlier than anyone predicted. Very happy not to be invested in Ocado currently. Price should gap lower as a result

Pokerchips,

Yes, markets starting to believe the feds actions may not be enough to get inflation under control therefore more unexpected rate rises ahead.

Investors are still in the "surely it will get better"mode. When further falls occur I can see panic setting in.

@finhar

Lol, you posted the same "rumour" a while ago. There are no cash flow problems at Ocado right now imo.

Fair play Carrington,

The markets are starting to price in a recession true. I believe the size of the recession will surprise the market further so further falls will follow. There of course will always be opportunities in the waves of trading however I see the downward trend continuing.

@chilting,

I predict Tesco and Sainsbury will certainly continue to home deliver over the next 6 months and beyond. They can utilise their strong supply chains and large branch networks for home delivery. They are getting closer to profitability online and will be taking customers from Ocado as customers look for a cheaper option. Very important for them that they stay in the online market. They can work on improving their profitability but they need to be present in the sector. What they certainly will do is increase delivery charges and the price of goods as Ocado has done.

In a vibrant market Ocados huge range is a big plus. In these money saving times consumers though are more focussed on the price of goods. In that comparison Ocado is and remains expensive.

"Kroger share price falling as is everything on the Down atm - value over there and indeed here in the UK will eventually be realised when shares are marked down to show value, then everyone will pile back in"

There's a clear, valid reason shares are dropping across the board. The economic outlook is deteriorating by the day. When investors wake up to this and realise things will get worse there will be further drops imo. At the moment many investors believe it's shorters playing games that's causing the drops. The reality is far darker..

@Newdealz,

Happy to be on the sidelines warming up for a move later on. Day trading is very risky in the current market imo

Certainly is a dangerous game Pokerchips.

Putin has calculated this through and his war is timed to cause maximum damage to the West. As an investor you can stay invested and hope for Russian regime change but the base case scenario is that he remains in power for many years and the war rumbles on for a year or more. This will cause great further damage to the worldwide economy.

It's is very painful for investors but we have it easy compared to those currently amidst the current warfare in Ukraine.

My share accounts currently are all cash. Happy to wait.

Newdealz,

The inflation crisis will cause the UK more problems than the US. Russian energy and oil supplies being cut off causes us more problems than them. Bank of England have been slow on rate rises to protect the fragile UK housing market. UK government politically very weak. Many strikes upcoming in the UK, wages increasing in the coming months further increasing inflation etc. UK economy currently the worst performing of the G7

We are just seeing the tip of the economic iceberg currently there's a lot more of it hidden underwater..

Good luck newdealz,

These recent falls to me simply reflect the reality of the situation world economy being realised by the market. US treasury note yields are rising fast reflecting the fact that interest rates in the US and soon to be the UK will rise quicker and faster than the market had predicted.

Many investors currently would rather hope things get better rather than grasp the gravity of the weakness in the world macro economy. When investors do acknowledge that the outlook is dire then the market will snowball lower..

Agreed hedged. A big part of why the Ocado share price had held up of late looks to be due to the modelling presentation Ocado recently had with analysts. Casapinos wrote an excellent summary piece on what was presented there. It gave the analysts more belief in Ocados finances. It was a well timed move by Ocado to halt the share price drop.

Those numbers are out there now. Ocado has demonstrated their finances to all. They can't do the same again. The share price has resumed its fall. Ocado need a new overseas contract. Only 1 extra CFC has been signed up since their reimagined presentation many months ago. In the current economic climate many prospective customers may be shying away from the costs of signing up with Ocado.

There will be concerns from the market as to whether the Feds big interest rate rise will be enough to tame inflation. Fed has already flagged another probable 0.75% rise in July. There may well be many rises after that though.

At least the US has a strong vibrant and economy. The prospects for the UK are far dimmer. There is a recession coming for the UK clearly, the question is how big will it be?

@Carrington

Rates in the US are rising quicker and faster than predicted. Wage inflation in the UK will come in the coming months as workers demand rises to help for the huge price increases of goods. Many strikes will occur in the coming months, the wage settlements of the back of them will drive inflation and interest rates up further.

@chilting

The shorters rightly are massing as the macro economic conditions have turned completely against Ocado. No new contracts for Ocado and their numbers will swell further.

A slight bounce back was to be expected. The market rarely drops down in a straight line for an extended period. The market is now pricing in a 95% probability that the Fed will raise rates 0.75%. It's the fed comments that will move the market today..

More downwards movements to come imo.

@Pokerchips

Automated grocery warehouses are the future. However to get to the future the Ocado share price is taking, and will continue to take a big battering.

Future could well be that Ocado is taken over. We will see. For now tho market conditions are resolutely against Ocado. With no contracts the shorts will mass further.