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Screenshot of a breaking news alert e-mail from Q2 2017
While the lifeline being provided by Charles Henri-Sabet and his co-investors in GLIO Holdings might be crucial for London Capital Group’s return to growth, it seems that current LCG shareholders don’t share his enthusiasm.
London Capital Group (LON:LCG) shares dropped another 18% on Wednesday to close at £0.21, the day after the company announced updated financing plans. As we reported yesterday, in a filing made with the London Stock Exchange, LCG stated that it intends to raise up to £17.5 million in a fresh equity injection led by online trading entrepreneur Charles Henri-Sabet, which would transfer effective control of the company to Sabet and an investor group backing him.
Assuming the financing goes ahead – it is subject to LCG shareholder approval at a meeting on July 3 – Sabet will become Executive Chairman of LCG. LCG will also likely switch to a straight-through-processing (STP) trading solution of Algoweb, a company in which Mr. Sabet has an interest.
The share price hit is, in our view, mainly a function of the dilution the financing causes existing shareholders. While LCG could certainly use the fresh cash, based on our calculations the convertible note issued to GLIO would result (upon conversion of the note) in the issue of 55 million new LCG shares – doubling LCG’s outstanding shares. An additional 75 million warrants being issued as part of the deal mean that existing shareholders would be eventually diluted to about 30% ownership in the company, with Sabet and his team owning about 70%.