Sports World, an operator of family sports clubs in Mexico, reported that it will issue shares for 106.2 million pesos to pay 10% of its bank debt, after receiving approval at the shareholders’ meeting held on December 10.

The company detailed in a statement sent to the Mexican Stock Exchange (BMV), which will issue 13 million 278,416 shares at 8 pesos each. The sale price would be 45.45% more compared to the 5.50 peso closing of this Monday’s negotiation in the stock market.

Analysts explained that the company seeks to capitalize and reduce debt with this operation, although the price is higher than what is currently quoted, so there is a risk that few will participate in it.

“This sale is aimed at the general public, but by offering a higher price than what it is trading, it runs the risk that no one will buy, but it is reflecting that its shares are undervalued,” explained Jorge Gordillo, director of Economic and Stock Market Analysis at CI Banco.

Jacobo Rodríguez, Director of Financial Analysis at Black Wallstreet Capital, explained that the price of Sports World’s public offering “is high considering the current market price, which may lead to think that current investors are not so interested, but that it is the valuation that the company puts because it considers that this should be worth its titles “.

However, Jorge Gordillo stressed that what the company is selling is an improvement in its profitability because it is going to pay debt and since it is negotiating its merger with Smart Fit, it would be bigger, with more opportunity.

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“At the end of this operation, the company will reduce its bank liabilities by 10.2%, thereby improving the level of leverage and reducing the financial burden, benefiting liquidity,” said Sports World, which reported a net financial debt of 2,967.8 million pesos at the end of the third quarter. of the year.

Jacobo Rodríguez considered that the offer would be aimed mainly at majority and institutional shareholders who can consider longer-term positions and who think that the price reflects their fundamentals in the future.

“Sports World is one of the companies that was most affected by Covid-19, it had to resort to some sources of financing, which caused its financial position to weaken,” said Jacobo Rodríguez.

“Today it is in a difficult position, but it must also be said that competition in the sector in which it operates has increased, the way in which people exercise has changed and it seems that it has not fully adapted to these trends. We will have to wait for more news to see how it will boost its business, “he added.

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