Another day, another drop in stock price. At least, that’s how it seems to be for Capita PLC (LON:CPI) (OTC:CTAGY).
What’s Going On Capita?
The U.K-based company announced last week, January 31, that it will be stopping dividend payouts until further notice. Capita PLC announced it will reinstate the dividend payouts after it figures out a way to generate free cash flow. After disclosing the plans, Capita’s stock dropped nearly 50%. This marks the fastest the stock has dropped in more than 20 years.
By now, it’s a pretty well-known fact that investors loath when companies halt dividend payouts. Most companies fear the process as well. However, CEO Jonathan Lewis seems to believe that not much can be done about it and that this is a necessary step to make the changes required for “Capita’s next stage of development.” Capita provides a number of services in the business process management sector, such as customer management, professional support, and administration. Regardless of providing resources to an always-in-demand market, Lewis stated that the Capita PLC lacks “operational discipline and financial flexibility.”
These comments probably didn’t help Capita’s case with investors. Hence the nearly 50% plunge. It seems now that investors might still be holding a bit of a grudge. It is now February 8, one week after the initial announcement to halt dividend payouts, and Capita’s stock is still dropping. On the London Stock Exchange, Capita was last seen trading down nearly 5%.
The Takeaway
It’s unclear right now as to the direction the company will be heading in from here on out. This might just be a minor setback, and Capita PLC could come back stronger than ever. That is, after making all the “significant changes” the CEO mentioned. What we do know for sure is that investors don’t like it when companies suspend dividend payouts, so I suppose it might be fair to say the fate of Capita PLC lies in the markets hands now.
Check back in next week to see what’s going on.
Featured Image: capita.com
