RE: Niall Booker Connection24 Jul 2020 13:49
Share price has been decimated by talk of a possible equity raise. Currently down by over 50% since that announcement. But I agree with the previous poster on here that any equity raise seems much less likely now that the share price is so low and that HSBC have since bought in. The maximum the board is authorised to raise in a placing is £5.2m, which at 5p would be around 30% dilution. That would be worst case scenario, and it still isn’t that bad. The company does not need to raise those funds to continue operating, but if they are to take advantage of all growth opportunities, then they would need open access to their £200m credit facility. They currently don’t have that because it was dependant on performance targets, which understandably were not hit due to the coronavirus pandemic. They are currently negotiating those extenuating circumstances with the lenders. An equity raise might have been needed to unlock that facility again, but now that HSBC are stepping in, I think it’s much more likely that they just enter into a new credit facility than do an equity raise to access the current one. HSBC bought 6.74% of the company since the announcement of a possible equity raise. In my opinion, there is no way they would have bought in unless they had reassurances that they wouldn’t be subjected to dilution through a placing. They are more likely to just provide the credit facility themselves. If we get an RNS of HSBC increasing their stake or of the credit facility being renewed / replaced to allow further growth, then the current £18m market cap could be blown out of the water. £72m cash, £360m loans book, £11.9m cash generation in the month of June alone. Not without risk, but this does have very high reward potential for those willing to take the chance at these levels.
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