2018-01-15 —

... the hard fact is that Carillion directors were boasting in March last year of having "substantial liquidity with some £1.5bn of available funding" yet the company ran out of money 10 months later.

That suggests delusion in the boardroom on a grand scale. Hedge funds, looking from outside and betting on the shares going south, seem to have had a better grasp of Carillion's financial distress than the insiders.


In the end, it comes down to judgments made in the boardroom. Carillion, outrageously, was declaring a fatter dividend for shareholders only last spring. Given what we know now, the correct action would have been to go to those investors and ask for a big injection of capital via a rights issue. Half the board would have had to resign, but an over-stretched balance sheet might have been repaired. Instead Carillion seems to have chosen to chase more low-margin contracts in a desperate attempt to keep its revenue line moving.

Regarding the point about this all being obvious to hedge fund short sellers, this article has more.

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