LONDON (Alliance News) - Online trading services provider London Capital Group PLC on Tuesday outlined plans to issue shares to a company controlled by Executive Chairman Charles-Henri Sabet.
Shares in the company were down 17% to 5.10 pence on Tuesday morning.
GLIO Holdings Ltd is controlled by Sabet and was created in 2014 in order to make a substantial investment in London Capital Group.
London Capital Group said it will issue 195.7 million shares to GLIO via a subscription agreement at 5.00 pence per share, plus another 19.6 million shares as payment of commission at 10% charged on the initial subscription amount.
London Capital also will issue another 71.0 million shares under an open offer, also at 5.0p, with another 7.1 million share can be issued to GLIO as commission on the open offer shares, reflecting GLIO's commitment to underwrite the offer.
Together, the subscription agreement and open offer will raise around GBP14.7 million.
In addition, London Capital said it will issue another 18.6 million shares to GLIO after it decided to redeem convertible loan notes held in the company. Those were convertible at 25.02p per share.
The convertible notes redemption will raise around GBP4.7 million more, meaning the total fundraising plans will raise around GBP19.4 million.
As a result of the proposals, London Capital said GLIO's total holding in the business will rise from 11% to around 81%, growing to 82% following the issue of the convertible loan notes.
The proposals also include a capital reorganisation, which would involve splitting existing London Capital shares with a nominal value of 10.00p apiece into one new share of 5.00p nominal value and one deferred share of 5.00p. This has to be carried out as the share price of London Capital has fallen below the nominal 10.00p value of its existing shares.
London Capital said it has sought to identify potential new investors in the business but, after a tough couple of years when its financial performance has failed to meet expectations, was unable to secure a new investor.
The directors of London Capital said they believe this to be the "only realistic route" for the company to increase its regulatory capital and strengthen its overall capital position.
London Capital said it has made a good start to trading in 2016, with the first quarter ahead of its expectations. The second quarter, however, has been "noticeably weaker" amid a lack of volatility and concerns ahead of the UK's vote on its place in the European Union.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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