G4S may announce cash call

The security company G4S is under pressue today, after revealing that it is in talks with shareholders to discuss the possibility of a cash call.

G4S is down 1.9% so far as the company considers asking its shareholders for additional funds via a rights issue.

A rights issue is when a company gives its existing shareholders an opportunity to buy additional shares in the company, usually at a discounted price. The number of new shares that are offered are in direct proportion to their current shareholding, so that their position will not be diluted. Companies tend to pursue a rights issue when they want to expand their business or when they find it difficult to borrow money. In this case seem to be the latter, as the company has had a spate of bad press over the past 12 months.

The fiasco at the London 2012 Olympics prompted the company to issue a profit warning in May, and the share price has dropped nearly 25% on the year. This news of a cash call sends out the message that the security company is struggling to get back on its feet.

G4S chart

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