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Zamano – believes close to a sought business disposal, so why are the shares lower?

By Steve Moore | Wednesday 9 August 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.

Attempting to sell its ‘premium SMS’ business and “in discussions with a number of parties”, Zamano (ZMNO) now “believes it is close to executing a transaction with a preferred party”. Sounds positive, so why are the shares lower, further below 4p?

Well, following the above, the company adds;
“Any transaction if it proceeds will be for a nominal consideration. zamano will also be required to make a cash contribution to the business to provide it with adequate working capital and in respect of potential liabilities that may arise following completion of the sale.”

This is with the prospective sale comprising its remaining operating business and assets as it seeks to maximise its cash available having concluded that “it is increasingly likely that the impact of regulatory changes across zamano's business lines will prevent the group from maintaining a cashflow positive trading position going forward”.

The end 2016 balance sheet showed cash (net) of €7.2 million and net (and tangible) assets of €6.2 million. These compare to a current market cap of £3.7 million (€4.1 million).

However, the above sees updated numbers awaited with particular interest, “nominal” sale consideration v. “cash contribution” for working capital and potential liabilities needing to be considered and, although talking of maximising the cash available “for distribution to shareholders”, it having previously stated “considering alternative strategic options”. Such factors see me currently continue to avoid.

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