Speculation over the weekend of a drastically downgraded rights issue has kept Rolls Royce shares down this week, and management is also reported to be in protracted talks with a host of sovereign wealth funds. At the end of last week, there was also speculation that the Kuwait Investment Office was also considering a stake, which would have put the British government in a somewhat difficult position given it has veto power of sorts over any shareholders abroad.

It’s clear that Rolls Royce needs cash to support its balance sheet, given the steep revenue drop it has seen in the past few months, which is likely to continue for some time into the future. However, the ongoing procrastination is not helping, and last night’s news that she is canceling her talks with KIO and Singapore’s sovereign wealth fund has shut down another avenue of business. It is reported that the failure of the talks was due to opposition from the current shareholders, which is fair enough, but then these current shareholders need to come up with alternatives or face a business disintegration. A vote will be taken on the deal on the 27th^{The tenth} October, when shareholders will have the opportunity to either float or be silent.

Today’s announcement is the launch of Rolls Royce £ 1 billion bond issuance plus £ 2 billion issue of 3 rights issue at 41% discount to 130 pence So it’s long overdue, and we hope it will be well received by the same rebel shareholders who have been reluctant to dilute their stakes with money from outside.