Estia Health shares are getting hammered

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Shares in aged care operator Estia Health fell hard after completing the institutional part of an equity raising to pay off debt.

A short time ago, its shares were down more than 8% to $2.46.

The company says it gathered $72 million from institutions at $2.10 a share. The retail offer aims to raise another $65 million.

Morgan Stanley says the equity raising has reduced balance sheet risk but diluted earnings per share by 17.4%.

And there’s still uncertainty from regulatory changes.

“There is uncertainty in the sustainability of earnings for this business,” Morgan Stanley analysts wrote in a note to clients.

“There is a poor track record of setting guidance, plus risk of further cost blowouts associated with integrating acquisitions and a strategic review while there is no full-time CFO.”

Shares in companies with exposure to Australia’s aged care sector have taken a hit since the federal government cracked down on extra fees being charged to residents.

In October, Estia lowered guidance for underlying EBITDA (earnings before interest tax, deprecation and amortisation) to between $86 million and $90 million from $105 million.