SNC-Lavalin Group Inc (TSX:SNC) announced on Friday that it would be selling 10.01% of the shares in Highway 407. This transaction could generate proceeds of $3.25 billion for the engineering company in what's proven to be a very challenging time for SNC. Amid some serious political and legal scandals, SNC might need the cash a lot sooner than later. The downside is that the 407 is a good source of revenue for SNC and while it will still retain 6.76% ownership of it, it will diminish its sales.
However, for SNC, given things might be a bit challenging for the company and with it seeing free cash flow in the red for four straight quarters totalling more than $450 million, it may be out of necessity that the company does this now rather than later.
In its most recent quarterly results, SNC incurred a net loss of $1.6 million and although much of that came from other expenses, it still produced a negative operating loss of $259 million.
Things have not been going well for the company, and in the past three months, the stock has dropped more than 25% in value. For some investors, they may see this as an opportunity to buy low and ride out the storm, waiting for a bounce back in the share price. The problem with that is that there's still a lot of uncertainty surrounding the company and we don't know if things will get better anytime soon. It's a very risky investment to make today.
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