FRANKFURT (dpa-AFX) - The placement of a convertible bond weighed on Delivery Hero shares on Tuesday. They fell to 41.20 euros and were among the biggest MDax losers in the late morning, still down almost four percent at 42.39 euros. Analysts took a positive view of the move. They speak, for example, of an improved debt maturity profile, as the food supplier is buying back other convertible bonds with a short remaining term. However, the new securities also make conversion more likely, as the conversion price is significantly lower than for old bonds that are to be repurchased.

While the new bonds carry a higher interest rate than those to be redeemed and threaten to dilute the company's share capital by around seven percent, the situation improves in terms of the group's cash flow, wrote analyst William Woods of Bernstein Research.

The potentially greater dilution results from the conversion price of the new bond of initially 57.75 euros. This is significantly below the conversion price of, for example, the 2024 bond of 98 euros. This means that significantly more shares would have to be issued to achieve the same total amount.

Although the conversion price is significantly higher than the current share price, it is only at the level of early February. The shares recently came under pressure again after almost doubling in value from their October low.

With the conversion price of 57.75 euros, the Group is creating a new basis and setting a level that seems more realistic with a view to conversion, explained analyst Giles Thorne of investment house Jefferies.

The MDax group generated gross proceeds of one billion euros from the new convertible bond, which runs until 2030. These are to be used to finance the buyback of outstanding convertible bonds and for general corporate purposes. All outstanding convertible bonds maturing in 2024 are to be repurchased, as well as up to approximately 250 million euros of outstanding securities maturing in 2025.

Analyst Woods noted positively that Delivery Hero is buying back the old convertibles at a discount. This compensates for the higher interest coupon of the new securities. In addition, he said the brisk demand from investors is a positive sign given the underlying strength of Delivery Hero's business.

The food delivery service's business had not grown as much as hoped at the end of 2022, according to figures from the second week of February, but the company made significant progress and lost much less money operationally in the final months of the year than in the same period last year. Group CEO Niklas Östberg believes his company is on track to meet its self-imposed profitability target. This was not enough for investors, and the shares came under heavy pressure after the publication of the results.

It did not help that Östberg had expressed confidence that he would be able to present an even higher operating margin for the current year than the Group had targeted. However, he said this was not the top priority; instead, he wanted to invest in the business. "As soon as we reach our profitability target, we could reinvest the surplus money in growth and in advertising," he told financial news agency dpa-AFX.

The company had promised a greater focus on profitability after a share price slump that saw its stock plummet from 131.50 euros in November 2021 to 23.88 euros in spring 2022, after years of aiming for as much growth as possible./mis/ngu/jha/