Wetherspoons may need to raise £250m to survive liquidity crisis, says Canaccord

Pub chain Wetherspoons may need to raise up to £250m to survive the liquidity crisis, Canaccord Genuity said on Wednesday.

"Wetherspoons’ long-standing, capable management team and outstanding 'value-for-money' proposition should stand it in good stead when the country starts to reopen for business," it said. "In the meantime it has withdrawn guidance, but our scenario analysis suggests that it may need to raise up to £250m to survive the liquidity crisis - not only to cope with closure but also potentially a sustained period of weak demand which does not suit its high-volume, high-cost, low-margin business model."

Canaccord said it expects the company is talking to the government’s Covid-19 Corporate Financing Facility and its bankers, and that investors should not fully discount an equity fundraise.

Its central case is for Wetherspoons to be closed for three months, reopening in July. This reduces Canaccord's sales forecast by £460m to £1.35bn for FY20 and by £470m to £1.42bn for FY21. "We admit there could be a wide variation to this scenario but the direction feels right," it said.

Canaccord- which pointed out that a fundraise would likely not be the preferred route for chairman Tim Martin - maintained its ‘hold’ rating on the shares but slashed the price target to 900p from 1,500p.

At 1050 BST, the shares were down 9.8% at 867p.