Calling time on Marston's

Rights issues have been a very popular way for companies to raise money of late. However, this type of fund-raising can have distinct drawbacks. The first is that they can be a very expensive way of raising new funds and, secondly, they can be horribly dilutive to earnings if the proceeds are not reinvested fast. We feel both these problems are evident in Marston's recently announced 11-for-10 rights issue at 59p a share, which is set to raise £176m. Indeed, broker Altium Securities has cuts its 2010 EPS estimate for the pub group by 42 per cent to 10.7p due to the massive increase in equity.