.13 Jun 2015 11:45
Octagonal plc – shares jump on Lenigas & co dealmaking
By Steve Moore | Friday 12 June 2015
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Shares in “AIM traded investing company focused on opportunities within the financial services' sector”, Octagonal plc (OCT) currently trade more than 40% higher today, at 0.26p, on the back of an announcement that “it has entered into conditional agreements to acquire the issued share capital of Global Investment Strategy UK Ltd that it does not currently own”. So, what’s the excitement about? …
Global Investment Strategy offers a range of financial services to institutional, family office and high net worth clients, though particularly global settlement and safe custody services. It generated a post-tax profit of £0.42 million on revenue of £2.55 million for the year ended 31st March 2014 and £0.26 million on revenue of £1.52 million for the six months ended 30th September 2014, at which date net assets totalled £2.53 million (though the valuation of its holding in AIM-listed Inspirit Energy has since declined by more than £0.45 million).
Having conditionally raised a gross £1.7 million at 2p per share (a 1 for 11 share consolidation is also proposed), Octagonal is to pay £1.5 million in cash and £6.72 million in shares (336,136,132 at 2p each) for the 90.03% of Global which it does not already own. This looks a lot for the current business, though it is noted that it is believed that it has “reached a point where the business is scalable and provides a suitable platform from which to expand the number of clients and the number of services offered, without the need for significant new capital”.
Having though mentioned “without the need for significant new capital”, a few paragraphs later it is noted that part of the reason for listing the enlarged group is “in order to provide acquisition capital”. Additionally, Octagonal director David Lenigas is also a director of Inspirit Energy where Global Investment founder & CEO John Gunn is also CEO and fellow Global director Nilesh Jagatia is Finance Director. Such linkages make me inherently cautious and this is not currently a stock for me.
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