By Steve Moore | Wednesday 17 May 2017
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.
Proxama (PROX), 13th December 2016: “We have been reviewing various options throughout 2016 to sell the Digital Payments division with a priority being to maximise shareholder value… The company remains committed to the sale and we believe that it will be completed”. Today: “the board has concluded that we remain the best owner for Digital Payments division… retaining this division as part of the group, with an updated strategy”. Haha – so having spent “throughout 2016” trying to sell the business and stating it “committed to the sale”, we’re now asked to believe that the company is actually “the best owner” for the business after all!?!
Proxama estimates it can reduce the annualised operating costs of the division by £1 million, enabling it “to extract value from the long-term contracted revenue agreements already in place… and use the high margin cash flow that it then generates to contribute toward the working capital requirements of the increasingly established Proximity Marketing and Data Division”.
Easy then! Er – well if it was that attractive, an acceptable offer for the division would probably have emerged in over a year and I also note that post the estimated restructuring it would only “contribute toward the working capital requirements”.
The announcement concludes that “the company has a number of funding options open to it should it require further working capital. Proxama will provide an update at the time of its full year results announcement, which has been scheduled for June”.
The explicit inclusion of “should it require further working capital” suggests to me it very much will and I look forward to reviewing the results next month. Natch, ahead of that announcement, this is a bargepole stock.
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