It has been an eventful few weeks for the Flight Centre Travel Group Ltd (ASX: FLT) share price.
The travel agent giant’s shares fell heavily in March amid concerns over its future because of the coronavirus outbreak.
In fact, Flight Centre was the second-worst performer on the S&P/ASX 200 Index (ASX: XJO) last month with a decline of almost 70%. This was despite its shares spending almost half the month in a voluntary suspension.
Not far behind was rival Webjet Limited (ASX: WEB), which lost 61% of its value over the same period.
Where next for the Flight Centre share price?
On Friday, Flight Centre’s shares remain suspended whilst it assesses the impact of the coronavirus on its business. However, the end of its suspension is now in sight and its shares could be trading again in the near future.
According to the AFR, Flight Centre and its bankers are trying to gain support for a $500 million equity raising. And like we saw with Webjet’s equity raising this week, Flight Centre looks likely to raise the funds at a considerable discount.
Sources have told the media outlet that Flight Centre is looking to secure the deal at a price of $7.20 per new share. This represents a discount of 27% to its last close price. It is also a whopping 85% lower than its 52-week high of $49.14.
Should you buy Flight Centre’s shares when they return?
Such a deal would be likely to give Flight Centre enough liquidity to weather the coronavirus storm and come out the other end in a strong position. However, there is always a chance the coronavirus crisis continues for longer than expected. If this happens it could put the company in a very difficult position.
In light of this, I think the prudent thing to do is to keep your powder dry and wait for the travel market to improve before considering an investment.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited and Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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