Major Investor Retreats as Eutelsat Seeks Crucial Funding

A significant shareholder has chosen to exit at a pivotal moment, casting a shadow over Eutelsat's ongoing capital increase. As the satellite operator works to secure fresh capital, SoftBank Group Capital has offloaded a substantial portion of its stake, sending the company's shares sharply lower and raising questions about private investor confidence.

The divestment by the Japanese technology investor could scarcely have come at a more sensitive time. SoftBank Group Capital disposed of approximately 36 million subscription rights. This transaction equates to roughly 26 million Eutelsat shares and effectively cuts the investor's holding by half. The market's response was immediate, with the stock declining around 7% following the news.

This sell-off pushed the share price to its lowest point since mid-June. A longer-term view reveals a more severe downturn: from its peak in March, the company has lost over 70% of its market value, prompting a sustained investor exodus.

Key Details of the Sell-Off:

• Substantial Disposal: SoftBank sold 36 million subscription rights.
• Reduced Stake: The move nearly halves the Japanese group's involvement.
• Market Impact: Eutelsat's stock fell 7% on the announcement.
• Price Trend: Shares hit a new low since June.

A Silver Lining from Moody's

Amid the negative sentiment, a contrasting development emerged from ratings agency Moody's. The agency upgraded Eutelsat's corporate family rating to Ba3 from B2. This improvement was attributed not to operational performance but to a shift in shareholder structure, with the French state becoming the dominant reference shareholder.

This newly reinforced link to the state is expected to provide the group with more favorable financing conditions. Moody's also forecasts that the company's net debt to EBITDA ratio will decline to 2.5x by 2026. However, the critical question remains whether an improved credit rating can counteract the downward pressure on the stock.

Should investors sell immediately? Or is it worth buying Eutelsat?

Capital Increase Nears Completion

Eutelsat is currently in the final stages of a €1.5 billion equity fundraising effort. A large portion of this total, €828 million, has already been committed by the French state at a price of €4.00 per share. For other shareholders, however, the terms are markedly different.

The ongoing rights issue, which runs until December 9, offers new shares at just €1.35 each. While core shareholders have covered about 71% of the offering, SoftBank's partial exit sows significant doubt regarding the appeal of the deal for private investors. The new power structure is clear: Paris is taking the helm, followed by Bharti Space and the British government.

Competitive Pressures in Orbit

Company management continues to express confidence, having reaffirmed revenue targets through to 2029 and expectations for improving margins. Yet the competitive landscape in space tells a different story. With a fleet of just over 600 satellites, Eutelsat faces a formidable rival in Elon Musk's Starlink, which operates more than 6,750 satellites and commands dominant market influence.

Eutelsat stands at a crossroads. The increased state backing may ensure its survival, but the retreat of a high-profile tech investor like SoftBank deals a blow to its growth narrative. Investors are now left to ponder: Is Eutelsat a potential turnaround story, or is it transitioning into a state-supported infrastructure entity?