A rights issue by UK life assurer Prudential has surprised investors by its inconsistency with previous statements, demonstrating the costs of poor investor relations.
Prudential issued its £1 billion ($1.805 billion) rights issue yesterday, October 20, announcing that the deal would help it take advantage of growth opportunities in the UK and Europe, and meet new EU capital requirements.
This surprised investors both because the company had until recently been playing down the possibilities for UK growth, ploughing money into its Asian investments instead, and because it had predicted enough earnings growth to save it raising any further capital.
Prudential did announce strong business figures for the first nine months of 2004, with a 16% rise in sales to £1.27 billion, but failed to explain to investors why it still needed an extra £1 billion in share capital.
And it did say that a small amount of the raised capital would be used to buy an increased stake in Indian assurer ICICI. But considering that many market commentators saw investment in Prudential as almost purely a play on growth in Asia, the announcement has been understandably viewed as a U-turn.