Shares in Bapcor Ltd (ASX: BAP) have collapsed on Friday after the automotive parts retailer delivered a heavy first-half loss. The company also unveiled a deeply discounted $200 million equity raising to strengthen its balance sheet.
At the time of writing, the Bapcor share price is down a massive 48.69% to 88 cents, marking a record low for the company.
Here's what spooked investors.
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Profit slump and balance sheet pressure
For the 6 months to 31 December 2025, Bapcor reported statutory revenue of $973 million, down 3.9% year on year.
Underlying EBITDA fell 40.4% to $76.9 million, while underlying net profit after tax (NPAT) dropped 87.3% to just $5.5 million.
On a statutory basis, the company posted a loss of $104.8 million. That included $110.3 million of significant items, largely related to impairments, inventory write-downs, restructuring costs, and accounting adjustments following an internal review.
Net debt rose to $387.3 million, up from $304.5 million a year earlier. Net leverage ballooned to 3.39x EBITDA, compared with 1.65x previously.
Free cash flow was negative $5.3 million for the half.
The board has elected not to declare an interim dividend.
$200 million raising at a steep discount
Alongside the results, Bapcor announced a fully underwritten $200 million equity raising to shore up its balance sheet.
The offer price has been set at 60 cents per share.
That represents a 48.4% discount to the theoretical ex-rights price of $1.16 and a 65% discount to the last close of $1.715 on 18 February.
Approximately 333 million new shares will be issued, representing around 98% of existing shares on issue.
The raising comprises a $150 million accelerated non-renounceable entitlement offer and a $50 million institutional placement.
Management said the funds will improve financial flexibility and resilience, with pro forma leverage expected to reduce to around 2.13x at 31 December 2025.
Banking terms revised
Given the sharp deterioration in earnings, Bapcor has also secured temporary amendments to its banking covenants.
Lenders have agreed to lift the net leverage covenant to 3.5x for upcoming test periods and lower the interest cover requirement before it resets in 2027.
While management framed this as a proactive balance sheet reset, the need for covenant relief highlights the pressure the business is under.
January trading offered limited reassurance. Group like-for-like sales were down 0.9%, with trade sales falling 2.4%. Networks, retail, and New Zealand recorded modest growth.
Foolish Takeaway
Today's sell-off points to concerns around earnings stability and balance sheet strength.
Issuing new shares equivalent to roughly 98% of existing stock is highly dilutive. Shareholders who don't participate will see their ownership materially reduced.
The need to loosen leverage and interest cover tests suggests earnings have deteriorated faster than expected.
On the positive side, the $200 million raise reduces balance sheet risk and gives management breathing room to execute its turnaround plan.
At 88 cents, the stock may look cheap. But from here, management needs to prove that margins can recover and that cash flow can stabilise. Until that happens, the share price may struggle to turn around.
