As ever, I am indebted to Rugger Guy for looking into the latest episode of Sevco for me.
Phil as per your request I have looked at the press conference by Mr King, and I have also looked at the Takeover Panel (TOP) rules on concert party dealings in the event of a rights issue.
Before I offer my opinion, it is important to remember that a rights issue document (Rights), is very different from the offer document (Offer) required by TOP.
Rights is very light indeed on required information, it will explain what the £6m is likely to be used for. It will include historical information, but will not need extensive reviews on contingencies.
However, Offer is a completely different scenario. It will be signed off by lawyers who are duty bound to protect minority shareholders in the event of any material financial risks such as lawsuits etc. It is also likely that financial requirement for working capital etc will be needed.
In my opinion, when the Offer is published, lots of investors will be rushing to accept the 20p offer and I cannot agree with Mr King’s assertion that no one will take this up.
On reviewing the TOP rules, my interpretation of the rules is that King and members of the concert party are prevented from dealing in shares (buying or selling) until the Offer is published and comes to a conclusion. This would prevent a debt/equity swap.
When you return to the Rights, I think that this is the opportunity for RIFC to raise £6m without any real scrutiny. The ideal tactic is to delay the OFFER as long as possible and produce the Rights ASAP. The concert party do not have to put their hands in their pocket, it will be the supporters who finance this. When the money is banked and if the Offer sees the light of day, it will then become obvious that the 20p offer is a very generous offer.
In the meantime, shareholders are diluted further and in my opinion, will see that the shares are virtually worthless.
What remains confusing is the timescale that TOP is working to because of his breaching of the requirements and how quickly and aggressively the Panel will act.
I must stress that we are breaking new ground here, but what remains crystal clear is that a £6m injection of funds is plastering over very large cracks, the operating losses of RIFC are set to increase and this amount won’t cover this, never mind providing fresh funds for players.
After receiving the foregoing I called himself and asked him I had fully understood his reasoning.
I put it to him as follows:
“So you’re saying that King is playing for time with the Takeover Panel so that he can do a smash and grab on the fans for six mill or thereabouts?”
In response, I got a meandering Sir Humphreyesque answer from my egg chasing mate, but essentially he let me know that I had pretty much got it.