Stanley Gibbons Fund Raising

Stanley Gibbons (SGI) issued a profit warning in late February indicated likely losses for the year, and immediately said they were considering a number of fund raising alternatives. More recently they have disclosed that they plan to raise £13 million by an issue of equity at 10p. This is likely to be a “placing” it seems although they have stated that “it will be executed in a manner that recognises the pre-emption rights of existing shareholders insofar as is possible”. That probably means there will be an “open offer” linked to the placing.

The heavily discounted placing caused the share price to collapse and it’s down a further 38% today at 23p. Placings often prejudice existing shareholders, and we covered some bad and good examples and the issues in our last ShareSoc Informer newsletter. In this case existing shareholders are going to be very heavily diluted (130m new shares to be issued when only 47m in issue).

Interestingly, Stanley Gibbons has done previous placings. One in 2008 where dilution was 19% and one in 2013 at 295p where dilution was 15% – the latter was to finance the acquisition of Noble whose integration seems to be one cause of their problems.

This company may have found it necessary to raise finance to avoid breaching banking covenants. One titbit of information of note in the announcement of the 23rd February that might have dismayed many investors was that the company had changed auditors as “the current auditors had resigned because they consider the risks and uncertainties associated with the audit to exceed the level they are willing to accept”. Does that mean they were concerned they would not be paid for their work? At the same time the company also changed their Financial Advisor, Nominated Advisor and Broker with immediate effect.

Altogether this looks a pretty sad tale. Shareholders should perhaps ask why these difficulties were not anticipated sooner. Having to do fund raisings at the last minute always creates problems and results in the company having to beg the sharks of the financial world for a bail-out. Perhaps a change of directors might also be appropriate at this company?

Roger Lawson 

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