Good morning. I ditched my shares in Volex (LON:VLX) after poor recent results, but more importantly on looking at forecasts it was obvious that the company would be running short of cash in 2014, since even on Edison's forecasts it would have hit a level of net debt to EBITDA of over 3.5 (where a level most Banks are comfortable with is nearer 1.5). So I sensibly sold, only to see a flurry of PR, including 2 commissioned research notes in the same week (a sure sign that they want to raise some money!), and sure enough a small Placing has been announced today at 116p. The only surprise is that they haven't raised more, so I suspect this won't be the last time they come back for more money.

In normal circumstances poor results, and a fundraising would have been a disaster for the share price, but in this case the price has bounced back and simply shrugged off the problems. Although I hear that management have been telling a convincing story on the rounds of broker/Institutional meetings, so for the time being the market is giving new management the benefit of the doubt on a turnaround story that hasn't yet delivered anything convincing. So I'm much more sceptical on this one now, and don't plan on revisiting it - the market could be a lot less forgiving the next time they disappoint perhaps?

The announcement today also indicates the the Volex Employees' Share Trust has sold 3.4m shares, of a total of 4m. Seems odd. I thought the purpose of such a Trust was to award shares to employees on predetermined performance measures? So it looks as if they are giving them cash instead perhaps?


It's absolutely extraordinary the amount, and frequency of fundraisings going on at the moment - literally every day there are Placings and/or IPOs, of increasingly dubious quality/value. So on this measure we're very much in late stage bull market territory. Sooner or later the market's appetite for new issues and Placings will be satisfied, but in the meantime on we go.





The danger of over-paying for a growth story was very much in evidence yesterday when shares in Perform (LON:PER) were absolutely crushed by a profit warning…

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