Shares in Malaysian Airline (MAS) plunged up to 20.8 percent after the company said it planned to raise 3.1 billion ringgit ($1 billion) through a rights issue.
"The dilution on the company from the issue will be immense, there will be supreme volatility in the stock until there is more clarity on the exercise," an analyst from Maybank IB Research told Reuters. The stock was down 19.3 percent at 82 sen as of 0202 GMT from its opening price of 1.01 ringgit.
MAS said the exercise would serve to pay capital and debt expenses, in an announcement to the stock exchange on Tuesday. The carrier posted a small operating profit of 4 million ringgit, ending six quarters of losses.
"There is no doubt the market is over reacting, but this is what will happen until there is input from the management on the structure of the rights issue," said the analyst.
MAS also said it will reduce the par value of its shares to 90 sen from 1 ringgit, in order to build a credit reserve of 8 billion ringgit.
"Investors are not confident with what MAS is going to do with the money. There is still a stigma, as investors are worried that MAS won't be able to turn itself around even with the money," said another analyst. The company raised 2.7 billion ringgit in a rights issue in 2010.