Thomas Cook Stock Worth Three Pence After Fosun Rescue Plan, Citigroup Says

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(Bloomberg) -- Thomas Cook Group Plc’s proposed recapitalization suggests its stock is now worth just 3 pence a share, according to the tour operator’s biggest bear.

Citigroup Inc.’s James Ainley, who sent the travel company’s shares plummeting in May by suggesting they were worthless, calculated his new price target as a rescue plan devised by shareholder Fosun International Holdings Ltd. threatens to dilute its overall stock by about a billion pounds ($1.26 billion), he wrote.

Ainley also questioned whether bondholders would accept the debt-for-equity swap, given the depleted valuation of the shares they would receive. Thomas Cook’s stock has plunged more than 60% since the proposal was announced Friday.

The plan “seems unrealistic,” he added in a research note, saying the company will probably have to issue fewer new shares than proposed, or persuade investors that they have a strong turnaround plan. Both approaches “look challenging,” he said, given the former risks limiting funds raised for the company or reducing the conversion of debt to equity, and there’s been little detail on a recovery blueprint so far.

Ainley maintained his sell recommendation, while “acknowledging that there could be some very modest residual equity value for current holders.” His target implies about 41% further downside from the stock’s 5.1 pence price at 11 a.m. in London.

Thomas Cook Stock Worth Three Pence After Fosun Rescue Plan, Citigroup Says

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