Compass (LSE: CPG), the world’s biggest contract caterer, and Whitbread (LSE: WTB), the owner of top UK budget hotel chain Premier Inn, are two FTSE 100 stocks I’ve written about positively during this stock market crash.
The news since I last wrote about them has reinforced my view they offer great value as long-term growth stocks. Furthermore, I think one common feature in the news from both companies gives private investors every reason to love them!
Fundraisings
Even if you’ve had only half an eye on corporate news during the coronavirus crisis, you’ll know there’s been a stampede of companies doing equity fundraisings. One particular type of fundraising has dominated. The following announcements from FTSE 100 stock Auto Trader, are typical.
“1 April 2020 (7.01am): Proposed placing of new ordinary shares. Auto Trader … announces its intention to conduct a … placing of up to 46,468,300 new ordinary shares … with institutional investors. … The placing will be conducted through an accelerated bookbuilding process which will be launched immediately following this announcement.”
“1 April 2020 (12.43pm): Results of placing. A total of 46,468,300 new ordinary shares … have been placed … at a price of 400p per placing share … a discount of 8.9% to the closing share price of 439.1p on 31 March 2020.”
Such placings are typically at a discount to the previous day’s closing price, and the shares are invariably offered to institutional investors. Sometimes there’s a parallel subscription for new shares by the directors and senior management. In choosing this type of fundraising, the company gives small retail investors no opportunity to participate.
FTSE 100 stocks with a difference
Compass and Whitbread are two FTSE 100 companies whose directors have shown a different mindset. On 19 May, Compass announced a placing and subscription. However, in addition, it announced: “There will be an offer made by the company on the PrimaryBid platform of new ordinary shares … at the placing price … to provide retail investors with an opportunity to participate.”
Retail investors who register with PrimaryBid get equal access to new share offers from public companies at the same price as institutional investors. Until recently, PrimaryBid largely handled offers by small companies. These were of somewhat mixed investment quality. However, with blue-chip Compass having now used it, I hope other high-quality firms looking to raise money will follow suit. Compass has walked the walk in demonstrating “Compass values its retail investor base.”
Whitbread has shown similar consideration for its retail shareholders. When it announced an equity fundraising on 21 May, it was by way of a rights issue. This gives all a company’s existing shareholders the right (but not obligation) to buy new shares in the company at a discount price.
Reasons I’d buy these two FTSE 100 stocks
I was bullish on the near-term survivability, and long-term growth prospects, of Compass and Whitbread before their equity fundraisings. I’m even more bullish now. The new funds have provided further balance sheet security. What’s more, they’ll enable both companies to continue to invest through the crisis. This investment should enhance their competitive advantages and consolidate their positions as industry leaders in their markets.
That these two companies have also treated their small retail shareholders on a par with big institutional investors is just one more reason why I’d be happy to buy shares in both of them today.
