Good morning! 

I added a section on Ten Entertainment (LON:TEG) late last night to yesterday's report. That report now includes Superdry (LON:SDRY), Equals (LON:EQLS), Alpha FX (LON:AFX), and Ten Entertainment (LON:TEG).

For today, we have:

Sosandar (LON:SOS)

  • Share price: 14.5p (pre-market)
  • No. of shares: 163 million (after Placing)
  • Market cap: £24 million (pro forma)

Placing to raise £7 million

Paul is going to chime in on this, but here are the facts:

  • Conditional placing at 15p (less than half of the share price at which it raised money last year).
  • Placing shares will represent 28.7% of enlarged share count. Meaningful dilution for existing holders, therefore.
  • General Meeting on 29 July to confirm the deal.

Analysis - It's not a huge surprise that Sosandar needs more funds, since cash had reduced to £3.6 million as of March 2019, and it is going to make loss this year while at the same time trying to almost double revenues.

Paul himself put it to management last week that "cash looks set to run out in early 2020", and received a reply he described as "generic".

It must be difficult for management teams in situations where we can see that they need more money, but they need to put on a brave face on things and give nothing away about conversations which might be happening in the background.

While I'm an outsider in this situation, I suspect that it was best to get this Placing away sooner rather than later. It's better to do it before the need for cash becomes desperate. Also, after a disappointing Q1, the direction of least resistance for the share price was downwards. Diluation at 15p might sting, but dilution at 8p after a weak Q2 would be far worse.

The size of the Placing is also quite interesting. £7 million should keep the wolf from…

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