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Well they need to get the covenant waivers but that doesn't mean they are insolvent. The auditors commented in the interims that the validity of presenting the accounts on a "going concern" basis depended on the ability of the Group to meet its debt covenants at March 2017, satisfactorily negotiate with its lenders to avoid the withdrawal of the Group's borrowing facilities in the next 12 months from the date of the interims or complete sale of the Group. I would be very surprised if negotiations with lenders aren't nearing a conclusion by now. I think I would expect the lenders to agree to waive the covenants as far as end-June (the longstop date for the acquisition to complete) but to be thrashing out with Sepura management what will happen if the acquisition does fall through - and that might mean asset sales (Teltronic?) to raise funds if they don't think they could push through a placing. This is where the new interim CEO and chairman should be earning their money - workable contingency plans to keep the business solvent which can be put into action if it becomes clear the acquisition won't complete.

On what basis do you say that Sepura is "technically insolvent"?

harry - just to be clear I got out on 13th Feb (as posted at the time) and am currently on the sidelines wondering about coming back in at some point. Although I still think on the balance of probabilities the merger will complete, I think it is much more finely balanced than it was. And if it doesn't, given the extended delay during which I imagine Sepura may well be cashflow negative, I'm not sure how much will be left for current equity holders after the debt holders force through whatever they need to restructure the debt. In terms of other (presumed) arbitrage companies I am watching with interest. I fear Oddo might be under some pressure since it built up its position with the help of contracts for difference, which are generally shorter-term instruments than straight equity. What I would really like to see is another institution start to buy, while what I wouldn't like to see (from the long perspective) is another institution compete to sell. I wouldn't be completely shocked if BNP put in a buy in the next few days just to see whether they could change market sentiment - but I don't think I would jump back in myself purely on the basis of a single day of buying from BNP.

15th Feb: Sold 250k at 15.97p 20th Feb: Sold 500k at 15.47p plus 100k at 15.55p 21st Feb: Sold 500k at 13.98p plus 250k at 14.50p So this seems to confirm a pattern of sustained selling, just as their buying was sustained over an extended period. It is noteworthy I think how fast the price they're selling at is falling, accepting under 14p for the bigger of their 2 sales yesterday.

Correction. In my original post in this thread I said BNP made a token sale on 13th Feb. In fact they were still buying on 13th, making a token (102k share) purchase on that day.

All BNP's purchases from when they initially declared at 1.03% (with a purchase of 1.4m at 19.39p) on 13th Jan up to their last declared purchase at 17.25p on 13th Feb which took them to 2.94% are in the public domain, as are their subsequent sales. BNP would have invested with a particular thesis - probably that the risk of the acquisition failing was reasonable given the arbitrage premium available. BNP would have revisited that thesis in the light of new information - in particular the successive delays to the expected completion date and the news on the German competition regulator phase II review. In the light of the 13th February new information it appears they decided that they could no longer justify holding such a big position given the price that they were able to offload at. That's not an unusual approach for an institution (or a private investor for that matter) I think. Don't you reassess your investments and your rationale for holding them when you get material new information?

So I think I'd ask myself whether the earlier drop was a tree-shake down, or maybe the later price rise is a tree-shake up hoping to get some PI's buying in for a bounce and taking enough shares to get BNP's volume away today (on the assumption that BNP has some shares it would like to sell today). Or it could just be that BNP has already got its shares away for today and relieved the selling pressure so the price can rise in anticipation of a healthier balance between supply and demand for the rest of the day.

I think supply and demand has got a lot to answer for here in terms of share price. In fact I guess it is the dominant factor driving the share price down at the moment. If you look at the 8.3 notices from about 20th December (after Henderson stopped playing) up to 14th Feb, you had a succession of institutions buying - first Oddo Meriten, then Cicogne, then BNP Paribas. Each of these institutions bought over a number of days. There were very few sales notified during this period. So I think what was generally happening was there was a constant stream of private investor selling where people were getting what they felt was close enough to 20p and the institutions saw arbitrage potential given the likelihood of the acquisition completing. Then after the 13th Feb update on competition regulators the situation changed. BNP sold a token amount on 13th Feb and then more on 15th Feb and 20th Feb. John Drinkwater also sold 2m on 13th Feb. Given BNP's track record of building its position over a number of days in January and February we might expect them to continue selling for some days to come. The question now is who will buy the BNP shares? At some point the price may get low enough for institutions to start buying, but at the moment maybe it is mainly a few private investors trying to pick the bottom. Personally I'd like to see another institution buying and preferably some positive news on the covenant waivers before I buy back. So I think we're in a period where there is one clear institutional seller, no obvious institutional buyer and some nervous institutions and private investors thinking about whether they should just cut their losses at this point. That is a recipe, in my opinion, for continued falls in the share price until there is some news that changes sentiment. It doesn't mean that the acquisition has fallen through or is about to - just that there is considerable uncertainty over the prospects for the acquisition, an excess of supply (of shares) over demand and no clear reason for investors to buy until something changes.

"all the better"? It certainly doesn't encourage me to buy back in. I was waiting to see some evidence that the "professionals" still thought that buying at this level provided a reasonable risk-reward balance. If some of the "professionals" who previously were buying for the arb are now offloading, that makes me think that maybe there is a risk that the market makers will move the price around in an attempt to get enough shares at the right price to meet a sell order from one of these institutions. i.e. that further falls in the share price might be managed (delayed) to try to maximise the institutional business.

Although in this case "purchase protection insurance" seems to be (relatively useless) accidental damage and theft insurance, not "payment protection insurance" against inability to pay.

Confirmation that it was PPI among other things. https://www.fca.org.uk/news/press-releases/express-gifts-ltd-enters-12-5m-redress-scheme

Beamer - one other thought on this. They could be referring to the "going concern" test. i.e. the auditors might decide that they can no longer present the accounts on a going concern basis and force them to take big write-offs. In the interims they made reference to the material uncertainty on this matter and they could decide I suppose that for the finals the remaining uncertainty is too great to allow them to sign off on a "going concern" basis.

wizard - both parties (Sepura and Hytera) still intend to complete the transaction. The issue is that there are things outwith their control which may prevent it: 1. Sepura has to secure a waiver of covenants from its lenders in March. Those lenders could decide they are more likely to see their money by demanding short-term cash-raising actions (which would then frustrate the acquisition or allow Hytera to renegotiate the terms) than by waiting for the merger to complete while Sepura continues to bleed cash. 2. The German competition regulator has apparently embarked on a full review (likely 3+ month process) of the proposed acquisition. As such the regulator could demand concessions that Hytera is unwilling to give or could simply block the acquisition. As I have said on here before I think the most likely outcome is that the transaction does complete at 20p, but there is significant risk now in my opinion that either 1. or more likely 2. causes it to be renegotiated or abandoned.

In past years I think they've had a lot of contracts landed and associated revenue booked in the last quarter of the financial year. Although they have tried to reduce this dependence, I expect it is still a critical time. In the annual report they said "The Board are taking action to improve revenue visibility and shorten the Group's working capital cycle by reducing the revenue weighting to the final quarter of each financial year." However, I agree it's difficult to see that there could be a huge amount of FY17 revenue at stake with a delay in completion from "early to mid-March" to beyond end-March (i.e. the end of the financial year). So I suspect the issue is that with completion beyond the end of the financial year they are going to have to come clean about the revenue shortfall in the April trading update. Whereas if the deal had gone through in February, or even March, they would presumably never have had to give another FY17 TU and it would have been left to Hytera to deal with the accounts.

Agree there's a reasonable risk here jamesroo - and even if it manages to trade through the German review, there is the risk that either the process gets pushed beyond the "long stop" date (giving Hytera the chance to walk/renegotiate) or that the German regulator wants to impose conditions that are unacceptable to Hytera (perhaps something around continued support for x years for all handsets in use in Germany at the time of the acquisition). That's why I'd like to see evidence that an institution thinks it is worth buying before I buy back. Because I presume those institutions that built up positions over the last couple of months will be reviewing the situation fairly carefully.

It will be very interesting to see what the institutions (or at least those that are not locked in by their "irrevocable" undertakings) do now. In particular, if Cicogne, Oddo, BNP start buying in volume again, I will take that as a positive sign - that they feel there is still something here to arbitrage with manageable risk. But I think there is a risk that they may try to cut their losses. Oddo in particular was buying with the use of derivatives, reporting some 10m shares held this way (cfd's I think), so might be faced with a decision on whether to roll them over or not at some point fairly soon (given it would have expected the deal to complete around 20th Feb). I'm quite tempted to buy some back at this price, but I'd like to see some evidence that the institutions which seem to have been playing the arbitrage game still believe it is worth buying at this level.

Well I did wonder if this would support the Siemens theory - just as Sepura appears to be staring into the abyss as an independent, and Hytera gets cold feet, along comes Siemens offering to save the day... A bit of a long shot though, I would have thought.

There are 2 main issues here I think. Firstly they have effectively warned on full year results ("may also impact Sepura's results for the financial year") and we know they need a waiver of covenants anyway from March. So what will the lenders' approach be to the new delay? Presumably their best chance of getting paid is if the deal goes through so I would have thought they would be supportive and would give the required waiver pending completion of the deal. Secondly the delay could put at risk the "long stop" date of end-June 2017 ("being the latest date by which the Scheme must be implemented"). They say that the full statutory period for a Phase II investigation is a further 3 months (taking them to mid-May say) with the possibility of further extensions to this period. So what will Hytera's approach be if the delay looks like pushing completion beyond the long stop date and the business in the meantime has suffered materially because of the uncertainty? Might they be tempted to back out altogether or seek to renegotiate? I tend to agree that the deal probably will complete at 20p before the end of June. But I think there is significantly more risk to it after this morning's announcement than there was before we knew about the likelihood of the German competition authority "Phase II" investigation.

Decided to get right out and see where it settles. Sold 4 times this morning, at 18.5p, 17.9p, 17.2p and 17.0.

I've sold just over 1/2 my remaining holding this morning. While there may have been an initial over-reaction in the share price, I don't like the comment in the rns about the impact of the delay on Sepura's full-year results. It seems more and more will be riding on the deal going through and if Hytera should get cold feet or try to renegotiate based on competition authority demands then Sepura may be in a difficult position.