Ambitious cyber security fighter Corero Network Security (CNS:AIM) has announced plans to raise around £5m in a conditional share placing priced at 5p per share. That’s a fractional 2.5% discount to Wednesday’s closing 5.125p share price. The stock nudged modestly higher on Thursday to 5.25p, valuing the business at about £10.6m.
But it gets more complicated. Chairman Jens Montanana plans to plough at least £4.2m of his own cash in, effectively bankrolling 84% of the fund raise. Montanana, the founder of IT infrastructure company Datatec (DTC:AIM), already owns 34.1% of Corero, the distributed denial of service (DDoS) specialist, so the new stock will take his stake over 50% of the company. This would normally trigger an outright offer for the whole company under Takeover Code rules.
To get round this Corero and Montanana are seeking a waiver from the Panel of Takeovers and Mergers.
‘We expect a waiver to be granted,’ says Indraneel Arampatta, an analyst at the respected technology analysis boutique Megabuyte.
DEVIL AND THE DEEP BLUE SEA
If Arampatta is right it will leave other existing shareholders with a minority stake in an effectively private business, controlled by Montanana. If the waiver is not granted the fund raise could fall through with little appetite seemingly left among other investors to dig deep into their pockets again.
Worse, with no new cash Coroero will find itself in serious schtook. Its SmartWall DDoS suite has made stellar progress over the past year or so (as Shares has pointed out) but it needs more cash to build scale.
‘Corero noted that it won’t be able to meet working capital requirements without the fundraise and, as such, its future remains uncertain,’ explains Megabuyte’s Arampatta.
