- Proposed de-listing from AIM
- Shares crash 70% to 0.61p
- £9 million of capital sought
Shares in LoopUp (LOOP:AIM) fell by as much 70% after the remote meetings specialist announced plans to de-list from London’s alternative investment market (AIM), with more than 27 million shares traded by lunchtime.
The company’s management said the reason for the proposed de-listing was to raise ‘at least’ £9 million to pay down debt and ‘for ongoing working capital needs.’
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WHY DOES LOOPUP WANT TO DE-LIST?
The company provides conferencing and cloud telephony services to mid-market and enterprise customers.
It floated on AIM in August 2016, more than doubling in size when it snapped up peer MeetingZone in 2018, but that year and the following year it revealed it was experiencing ‘challenges entering new markets’ and ‘potential churn’.
Since the end of the pandemic, the company has faced intense competition from other video conferencing services offered by Microsoft Teams, Zoom Video Communications (ZM:NASDAQ).
LoopUp's remote meetings lunch is being eaten by Microsoft, Zoom and others
The firm said trading in 2023 was in line with expectations, with revenue seen at around £21.2 million up 34% on a like-for-like basis.
According to Gartner, the cloud telephony market was worth $22 billion in 2022 and is expected to reach $29 billion by 2026, but LoopUp desperately needs cash to grow and to service its £6 million of loan facility with Bank of Ireland which matures at the end of September.
Unable to raise money in the public markets, the company has decided to cancel its listing and seek capital as a private concern.
Co-heads Steve Flavell and Michael Hughes said: ‘The priority for us now is to ensure we have the right funding to continue this growth and deliver on our potential. We have exhaustively explored all options to arrive at today’s announcement, with the board unanimously concluding that this proposal to delist and conduct a private fundraising is in the best interests of the group and of our shareholders.’
WHERE DOES THAT LEAVE SHAREHOLDERS?
In a document to shareholders, the company said: ‘The group intends, irrespective of any share price movement in the interim, to raise the funds at 1.75p per share, which would represent a discount of circa 14.6% to the closing price on 7 March 2024, being the last practicable date prior to posting this document, of 2.05p, although the directors may adjust this price depending on the investment offers which are presented to the group as part of the proposed fundraising.’
Shareholders will get the opportunity to vote whether the company de-lists on 11 April 2024 – 75% of the shareholders will need to approve the de-listing for it to go ahead.
‘If shareholders wish to buy or sell ordinary shares on AIM, they must do so prior to the cancellation becoming effective. In the event that shareholders approve the cancellation, it is anticipated that the last day of dealings in the ordinary shares on AIM will be 10 April 2024 and that the effective date of the cancellation will be 11 April 2024.’
EXPERT VIEW
Analysts at Megabuyte commented: ‘One obvious question in any take-private/cancellation such as this is whether the company is being taken private on the cheap. In the case of LoopUp, if it raises the £9 million, this will represent an enterprise value of around £16 million based on the current market capitalisation and net debt, with £3 million of the raise being used to reduce debt.
‘This would represent five to six times trailing EBITDA (earnings before interest, tax, depreciation and amortisation), but we suspect a higher multiple on a forward-looking basis given the ongoing decline in profitable legacy conferencing relative to fast-growing but cash-consuming cloud telephony.'
