Kosmos Energy – After the Capital Increase: What the Company Looks Like Now

Kosmos Energy carried out a painful capital increase this week. The increase was forced by the banks (with whom they have the Revolving Credit Line), but the problem was not so much the capital increase itself as the price at which it was done. Kosmos hired Stifel and Barclays to carry out the capital raise — the first because of its expertise in the industry and because it is the one they are used to working with, and the second to reach a larger market in America and Europe.

Barclays’ performance was quite regrettable — according to institutional investors involved in the process — pitching the capital increase as easy money and selling it to many hedge funds that intended to make a quick 5% and then rotate into something else. The huge trading volume during the two days following the capital increase confirmed this, and the stock closed the week very strongly above $2.3.

The green shoe option was fully exercised, so in the end 112 million shares were issued — almost a 20% capital increase at a price of $1.90, a 26% discount (with the over-allotment at a slightly higher price). Heads should roll, and the CFO’s should be the first — he had already carried out some terrible hedges in the past.

The conclusions from this capital increase are that, together with the sale of Guinea (also too cheap) and the hedges carried out now ($80 in 2H26 and $70 in 2027), the downside risk of the stock is now fairly limited and the risk of bankruptcy has been considerably reduced — even more so with each day the conflict in Iran continues. However, the upside has also decreased since production has been reduced and the number of shares has increased by almost 20%. It is worth noting that management invested $7 million in this capital increase.

We have updated the model with the new shares and the production adjustment: