Bring back the rights issue, all is forgiven. Had Taylor Wimpey opted for a traditional underwritten rights issue to raise the £500 million it needs, everything might have worked out rather differently. Instead, it followed Barclays' lead and attempted to bring in the cash by placing new shares with existing and new shareholders at a small discount to the then market price.

Its main shareholders appear to have been supportive. But the new investors it was trying to bring in were spooked by this week's grim housing news and pulled out. That left it short of its target and, rather than risk having to come back for more later, it pulled the plug.

Of course, it would not have been easy to persuade the banks to underwrite a rights issue in current conditions. I don't suppose its advisers, UBS and JPMorgan Cazenove, were exactly queueing up for the job. Nonetheless, it would probably have been do-able, at a price. Taylor Wimpey's experience highlights the drawbacks of the large placing, quite apart from the dilution that it imposes on existing shareholders.

After yesterday's share price collapse, it is safe to assume that a rights issue is not now one of its fundraising options. The good news, according to the company, is that it has some time to play with. Unless sales dry up completely, it should be able to generate enough cash to keep going, though this may require it to sell land.

Its bank covenants will not be tested until February and the optimists suggest that if these are breached, which seems highly likely, the banks may be reasonably accommodating. After all, with their own balance sheets under so much strain, the last thing they want is to take Taylor Wimpey equity in return for debt. But their support cannot be taken for granted and there is no guarantee that there would be much left for shareholders.

Taylor Wimpey can point potential investors to a current net asset value of about £2 a share, compared with a price of 35p. If house prices fall by 20 per cent, further heavy writedowns will be necessary, though that would still leave NAV at above £1 a share.

But no investor is going to put money in at anything like £1 a share, so asset value will be severely diluted by the necessary fundraising. And that fundraising needs to happen soon. Many of its rivals are also looking for money and investor appetite is not limitless. If only, like RBS, Taylor Wimpey had got its rights issue in first.

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