(Bloomberg) — Ocado Group Plc raised £575 million ($705 million) to fuel expansion even as the surge in online food shopping during the pandemic recedes with soaring inflation thinning consumer wallets.
Shares in the British e-commerce group fell as much as 6.1% in early trading Tuesday, after Ocado sold 72.3 million shares in an accelerated placing, in an emailed statement.
Stock in the offering priced at 795 pence each, representing a 9.4% discount to Monday’s close. Ocado raised about £3 million pounds in addition from retail investors and certain members of the senior management team.
Ocado, whose shares have nearly halved this year, said the funds will give it enough liquidity to meet existing commitments to current clients and drive further growth as it seeks to become the top global provider of automated online grocery-fulfillment technology.
“This should be a long-term positive for the stock in solving the liquidity challenge that was coming in the next couple of years,” William Woods, an analyst at Bernstein, said in emailed comments. “The need for capital was well understood and well flagged.”
The company also agreed a new £300 million credit facility with a group of banks and reiterated its outlook for this year.
Founded by three former Goldman Sachs Group Inc. bankers in 2000 as an online grocer its main focus now is selling robotic warehouse technology to third parties. It maintains partnerships with retailers worldwide from Kroger Co. in the US to Coles Group Ltd. in Australia.
Ocado has hardly ever made a profit since launching, while raising significant amounts of cash to fuel the development of its robotic “grid system.”
Capacity Boost
The company bills its robotic warehouse technology as the answer to online grocery, but its inability to ramp up its operations quickly meant it failed to fully benefit from the biggest grocery e-commerce bonanza after the pandemic spurred many consumers to try ordering food via online for the first time.
During the pandemic, Ocado Retail, its joint venture with Marks & Spencer Group Plc, struggled with capacity, having to temporarily close its website in March 2020 because it was deluged with orders. Ocado’s pretax loss more than tripled last year.
Even before yesterday’s fundraise, Ocado said it would boost capital expenditure to £800 million this year, up about 18% from 2021, to meet the growth of its solutions business.
Read More: Ocado $700 Million Equity Raise Signals Capital Intensity: React
All the customer commitments for warehouse technology it currently has provide potential group revenue of £6.3 billion and earnings of more than £750 million, Ocado said in an earlier statement on Monday.
(Updates with share price and additional information throughout.)
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