Shares in Malaysian Airline System Bhd (MAS) plunged up to 20.8 percent after the company said it planned to raise RM3.1 billion (US$1 billion) through a rights issue.
"The dilution on the company from the issue will be immense, there will be supreme volatility in the stock until there is more clarity on the exercise," an analyst from Maybank IB Research told Reuters.
The stock was down 19.3 percent at 82 sen as of 0202 GMT from its opening price of RM1.01.
MAS said the exercise would serve to pay capital and debt expenses, in an announcement to the stock exchange on Tuesday.
The carrier posted a small operating profit of RM4 million, ending six quarters of losses.
"There is no doubt the market is over reacting, but this is what will happen until there is input from the management on the structure of the rights issue," said the analyst.
MAS also said it will reduce the par value of its shares to 90 sen from RM1, in order to build a credit reserve of RM8 billion.
"Investors are not confident with what MAS is going to do with the money. There is still a stigma, as investors are worried that MAS won't be able to turn itself around even with the money," said another analyst.
The company raised RM2.7 billion in a rights issue in 2010.
- Reuters
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