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Surface Transforms - discounted fundraising o’clock (as warned)

By Steve Moore | Thursday 6 July 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.

In December I noted cash concerns on Surface Transforms (SCE) following a half-year trading update. I reiterated these last month, despite the company arguing “we continue to look forward with confidence”. Now surprise, surprise it’s discounted fundraising ahoy.

This is with it “pleased to announce that the company is carrying out a placing, subscription and open offer… at a price of 15.5 pence per share to raise gross proceeds for the company of approximately £3.5 million”, including that the issue price “represents a discount of approximately 0.8% to the price of 15.625 pence per existing ordinary share, being the closing price on 5 July 2017”.

That sounds ok, but compares to above 19p last month when the company was emphasising “continue to look forward with confidence” and comfortably above 20p on the December update when it noted “continues to make progress with potential OEM customers”.

These compare to now; “Extended testing however required by OEM 3, together with additional unbudgeted development costs and delays in contracted aerospace revenues resulted in the board deciding to raise additional money to maintain R&D momentum and progress potential OEM contracts as well as avoiding any significant working capital constraints”.

Er, it was cash crunch ahoy! But “the board considers that substantial operational progress has been achieved in the last 15 months, and whilst this has not yet translated into commercial agreements for volume road cars, they are increasingly confident on the outlook of the business and further commercial contracts being awarded”.

Er, based on the above, I think I’ll wait for some delivery rather than just further increasingly confident” of jam tomorrow before reconsidering my stance here. I continue to avoid.

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