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Cochlear Ltd Capital Raising

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Cochlear Ltd (ASX: COH) is a global leader in implantable hearing solutions. Cochlear has provided more than 550,000 implantable devices to all ages. Cochlear has a market capitalisation of $9.2 billion.



Update on Coronavirus

The coronavirus (COVID-19) was first reported from the Wuhan province in China on 31 December 2019. The World Health Organisation data shows a total of confirmed cases of 372,757 and 16,231 deaths globally. As of today (25 March 2020), there have been over 2,136 confirmed cases and 8 have died of COVID-19 in Australia.

What has happened to Cochlear share price?

Over the last month, Cochlear share price has fallen 27% and is currently trading at A$168.

What has Cochlear announced today?

In addition to announcing on the 16 March 2020 that Cochlear is withdrawing its FY20 earnings due to the spread of COVID-19, causing a growing number of health authorities either recommending or enforcing elective surgery deferrals.

Cochlear announced today (25 March 2020) a capital raising plan to enhance liquidity. The capital raising plan consists of a A$800 million Institutional Placement and a non-underwritten Share Purchase Plan, to raise up to A$50 million. The plan also includes a credit approved commitment for an additional A$150 million bank facility from an existing lender and the suspension of the Company’s dividend until trading conditions improve following payment of the 1H20 dividend on 17 April 2020.

This capital raising plan is in line with Cochlear 16 March update, where Cochlear management notes the economic consequences of the COVID-19 outbreak is expected to cause significant disruption for Cochlear as elective surgeries are deferred across a growing number of countries. However, as announced on 17 March 2020, the U.S. Court of Appeal has affirmed the U.S. District Court patent infringement damages award against Cochlear.

In response of this development, along with revenue concerns surrounding COVID-19, Cochlear has decided to enhance the company’s balance sheet with an injection of liquidity.

What is the outlook for Cochlear?

The short-term outlook for Cochlear is unfavorable. This is due to the significant impact COVID-19 is having on Cochlear business activities. However, it is important to note that the long-term outlook for Cochlear is still positive. Cochlear is a global leader in hearing solutions that has a competitive position in several markets globally. Cochlear has an estimated 60% of global market share and in excess of 600,000 implants sold over the last 40 years. It is expected that most of the deferred surgeries will be recovered when it is safe to do so. After COVID-19 is contained, Cochlear can expects strong growth in cochlear implant units in developed markets driven by the recent launch of the Nucleus Profile Plus Series cochlear implant. Cochlear also expects to release the new osseointegrated steady-state implant (OSIA) product later in FY20 to extend the Acoustics product portfolio.


This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.

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