Here’s why the Great Portland Estates (GPE) shares are in a freefall

By:
on May 28, 2024
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  • Great Portland Estates stock has plunged to its lowest point since August 2012.
  • The company is raising £350 million to invest in London real estate.
  • It also reported weak financial results last week as the industry slowdown continues.

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The Great Portland Estates (LON: GPE) share price plunged hard on Tuesday, becoming the worst-performing company in the FTSE 250 index. It tumbled to a low of 337.5p, its lowest level since August 2012. It has dropped by over 60% from its highest point in 2020.

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Why GPE is plunging

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The Great Portland Estates has joined other global property companies in a steep sell-off as concerns about demand and interest rates remain.

In the UK, most analysts have started to change their views about when the Bank of England (BoE) will start to cut interest rates. Before the UK released strong inflation numbers last week, the view was that the bank would start cutting rates in June. Now, most economists see the first cut coming in July or after the election.

Great Portland Estate and other real estate companies are struggling amid high interest rates, low demand, and the shift to hybrid work. As a result, the UK vacancy rate has jumped to the highest level in years.

Great Portland Estates stock price is tumbling after the company placed a big bet that the industry has bottomed. It will offer a £350 million fully underwritten rights issue to make opportunistic acquisitions in the commercial real estate sector

This cash raising is a sign that the management believes that the situation is so bad right now that it can only go up in the coming years. GPE has taken similar opportunistic moves in the past such as when it raised £300 million in 2014 and returned £616 million to its shareholders.

The company’s announcement came at a time when it reported weak financial results. Its net assets came in at £1.6 billion, down from £1.9 billion in 2023. Also, its portfolio valuation dropped from £2.38 billion to £2.33 billion. Its total shareholder return for the year was minus 21.3%.

Great Portland Estates’s management believes that the business has room to emerge from the current situation. Besides, it has some of the biggest tenants in the UK like KKR and Clifford Chance

Great Portland Estates share price analysis

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Great Portland Estates

GPE chart by TradingView

The daily chart reveals that the GPE stock price has been in a strong bearish trend for a long time. This crash happened as the commercial property industry came under intense pressure. It moved slightly below the crucial support at 351p, its lowest swing since February. 

The stock has remained below the 50-day and 100-day Exponential Moving Averages (EMA), signaling that bears are in control. Therefore, the stock will likely continue falling as sellers target the key support at 300p. In the long term, however, the stock will rebound as the UK’s commercial real estate industry starts recovering.

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