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InterQuest – an angry shareholder writes…

By Steve Moore | Sunday 21 May 2017


Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Having announced it is to make a 42p per share offer for InterQuest (ITQ) (Tom made his thoughts clear on the offer HERE) the following features the management buyout team’s (Gary Ashworth, Christopher Eldridge and David Bygrave, (‘Chisbridge’)’s) reasonings for the offer (in bold italics) and my responses following…

“The Board of Chisbridge today announces that it intends to make a cash offer, with a loan note alternative… 42 pence… represents a premium of 9.3 per cent. to the Closing Price of 38.4 pence per InterQuest Share on 15 May 2017… and a premium of 14.85 per cent. to the average Closing Price per InterQuest Share of 36.57 pence, being the average Closing Price per InterQuest Share on each of the Business Days in the three months prior to 15 May 2017”

The offer announcement also includes that “in the past twelve months the share price has been as high as 99 pence per share in May 2016”. Indeed, it was more than 80p before a June profit warning, which included that “the management team have made a cautious assessment of the circumstances”.

The announcement also includes that “the Company has continued to report profits above those recorded at the time of its Admission and yet its share price has, for significant periods including the past nine months remained below the price at which Admission occurred, namely 55 pence per share”. So the executive management are complaining about a below 55p share price in relation to what is being delivered and their solution is to offer… 42p per share!?! Absolutely ridiculous. The “loan note alternative” is also a joke – interest (3% per annum above the Bank of England base lending rate) to be accrued and only paid on redemption, with a face redemption date of… 30 June 2027!?!

“According to its published annual report and accounts for the year ended 31 December 2016 turnover for the InterQuest Group for the year ended 31 December 2016 was £143.61 million. The loss after tax for the year ended 31 December 2016 was £1.24 million. The InterQuest Group had net assets of £22.11 million at 31 December 2016… Whilst trading has stabilised in the final quarter of the year, the Management Team believe that InterQuest's performance remains subject to wider economic sentiment which remains difficult to forecast due to Brexit uncertainties.”

The first two “Financial highlights” of the March initial 2016 results announcement were “Group operating profit before exceptional items decreased 35% to £3.2m (2015: £4.9m)” and “Adjusted PBT* decreased 34% to £3.3m (2015: £5.0m)”, now the focus is on statutory “loss after tax”. Funny that. It becomes an inconvenient truth that “trading has stabilised” and the stated “net assets of £22.11 million” compare to 42p per share “values the existing issued share capital of InterQuest at approximately £15.8 million”. Absolutely ridiculous.

“The public quotation of the Company's shares now serves to demotivate option holders who are regularly reminded that their equity incentives are underwater.”

So in the good times the option holders make hay and in the tough times… er, they should be making hay also as ordinary shareholders suffer? Absolutely ridiculous.

“Chisbridge was incorporated in England and Wales on 28 October 2016 for the purpose of making the Offer… On 22 November 2016 the Management Team requested permission from the board of InterQuest to evaluate the viability of a management buyout of the Company. The Management Team since that time has been structuring an offer”

They’ve spent six months “structuring an offer” during a stated “difficult” period when the business has clearly needed close management. Absolutely ridiculous.

“In particular, the Management Team believe the continued volatility of the Company's share price and the disproportionate effect of negative news on the share price has negatively impacted the perception of the Company by clients and staff… Given the historic and, in the opinion of the Management Team, disproportionate negative impact on the Company's share price, arising from the public announcement (in accordance with the AIM rules) of short term trading challenges, the Management Team believe the Company's stakeholders' interests would better be protected in these circumstances if InterQuest was a private company.”

Offer a fair price then robber barons.


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