By Nigel Somerville, the Deputy Sheriff of AIM | Tuesday 19 July 2016
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.
AIM-listed jam-tomorrow investment company Tern plc (TERN) has announced yet another fundraising this morning – this time at just 8p per share, raising £0.525 million. That won’t have gone down too well with those who ponied up at 12p back in February when the company raked in £1.1 million, or those who contributed to the £0.72 million placing at 12p last August.
We are told that this latest confetti shower will be used primarily to provide additional finance to develop the businesses of the existing portfolio companies. “Primarily”….so a chunk of it is to keep the lights on, then. How much of that cash is needed to keep the meter running? Who bought the shares? We don’t know.
As ever, there is plenty of jam-tomorrow on offer, with the newly acquired businesses (ie the bits of Flexiant picked up from administration for £75,000) having generated several new commercial opportunities in the last three weeks. As ever, further announcements will be made in due course - if, of course, these opportunities actually turn into something concrete like cash. But short-term, if they do, one would wonder why raise the cash at a discount and with the share price on its knees?
The BBs seem to be split into two camps, with some despairing at the share price fall from around 16p in May and seeing a little short of 10% of the company given away at half of that price. More of a concern may be that the price at which Tern has been able to raise new money seems to be falling – as is the share price, which peaked early last September at 29.5p.
The bulls, on the other hand, are focussed on the fortunes of Tern’s biggest play, Device Authority (formerly Cryptosoft before the merger with US-based Device Authority). We keep getting nice warm fluffy updates on this – the latest being that Device Authority is trading to budget and making considerable progress in its marketplace, but for all the business opportunities and considerable progress we are yet to see a cash-generative deal of any magnitude being announced.
Shares in Tern opened below the placing price this morning, suggesting a less than appreciative welcome for today’s news, and despite recovering to (just) above it have slipped back below again (last seen). It doesn't auger well.
For all manner of reasons (many to be found HERE) I remain very much with the bear camp on this one. Whilst it is always possible that a rabbit could be pulled from the hat, the slide in the share price suggests that the market is growing weary of waiting for its spoonful of Hartleys.
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