Good morning!

Crawshaw (LON:CRAW) & fundraisings generally

If I were a shareholder here, I'd be very unhappy with a Placing that has been announced this morning. It involves the enlargement of the share capital by 36%, to raise £8.8m at 42p per share. That would have been a sensible price when the roadshow started a few weeks ago, but the share price has risen very strongly since, on the AGM announcement about accelerating the roll out of stores nationally (it's a small Northern butchers chain at the moment).

The trouble is that the share price was 54p last night, 60p the day before, and peaked at around 70p a few days before that. So doing a Placing at 42p dilutes existing holders considerably at what is now an unfavourable price.

You can see from the chart below that the Placing was probably set up in early June, then there would have been maybe a fortnight of meetings with Institutions, etc, so at first the 42p price would have seemed sensible. However, the big spike in price since mid-June has caused the problems here. Anyone who bought in that spike must be feeling very bruised now, especially as a lot of the spike was caused by the company itself putting out a bullish strategy statement in the AGM trading update. This would not have been a problem if existing holders had a chance to buy at 42p too. The additional costs of an Open Offer are not a lot, about £30k I've been told. So this could, and should have been done.

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The big mistake, as we so often see with fundraisings, is that existing shareholders were completely excluded. I don't hold here, but in principle this is totally unacceptable. Unless there is a very good reason not to do so (e.g. an emergency fundraise, which this wasn't), then companies should ALWAYS allow existing shareholders to participate in a fundraising on equal terms to people taking part in the Placing. A sensible fundraising would be 50:50 between Placees and existing holders through an Open Offer.

Better still, you can do what Volex (LON:VLX) recently did, and give priority to existing holders in an open offer, and then have placees lined up to take any shares which existing holders don't want. That's the best way to do a fundraising, as…

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