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Ocado still doesn't convince

Ocado's shares bounce on fundraising, but doubts remain
November 20, 2012

Shares in online grocer Ocado (OCDO) leapt by more than a quarter on Monday after the company announced a £35.8m placing and the extension of its financing arrangements, staving off a potential financial crunch in the process.

IC TIP: Sell at 76p

But the share price rise was more likely down to relief on investors' behalf and covering by short sellers rather than a widespread belief that the funding will be enough to push Ocado over the line into a consistently profitable operation. Admittedly, the fundraising was at a premium to the Ocado share price at close of play on Friday. But, at 64p, it is a pale shadow of the 180p a share valuation given to the company at the time of its float in 2010. For long-standing investors it is probably a small price to pay to guarantee the company sees it through to the next stage of its development.

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