The IAG (LSE: IAG) share price has plunged nearly 80% this year, making it one of the worst performers on the London Stock Exchange. A further decline of 30% yesterday has taken the shares back to prices not seen since 2009. So with the airline owner priced at just 135p, is it now the perfect time to buy?
What caused the 30% fall?
In order to strengthen its balance sheet, reduce leverage and enhance liquidity, IAG decided to issue nearly 3bn new shares. This meant that the company was able to raise €2.7bn in extra cash. In theory, this does sound very positive. However, by issuing more shares, it leads to stock dilution and this decreases shareholders’ ownership in the company. This subsequently led to the drop in the share price.
In the case of IAG, the share dilution was severe. In fact, for every two shares currently held,