from todays australian newspaper

Senetas investors 'gobsmacked'
Michael West
06dec06

IRATE investors in data security company Senetas watched their stock get thumped yesterday as Senetas revealed a profit downgrade just one hour after declaring its chairman and others had sold a large stake.

At 11.48am, Senetas announced chairman Francis Galbally, director Ron Lunt and "another associated Senetas shareholder" had sold 21 million shares at 55c apiece to a mystery offshore company, IKL Management.

One hour and 20 minutes later at 1.08pm, Senetas gobsmacked its investors with a profit downgrade. The stock slumped from 46c, hitting a low of 40.5c after the bad news, before closing at 42.5c.

"Are these guys taking control without offering other shareholders the same deal?" asked one angry stockbroker who had clients in the stock. The Australian was unable to contact Senetas last night.

Although the company's announcement does not indicate when Mr Galbally and Mr Lunt struck their deal, it was part of a broader $40 million capital raising for the "purposes of a future strategic investment" through a combination of a private placement of 46.02 million shares at 55c a share and a convertible note for $14.72 million in a transaction managed by Shaw Corporate Finance.

The nature of the investment, said the announcement cryptically, would be "commercially confidential for some time".

"In preparation for the investment, Senetas had entered into a strategic alliance with IKL Management Group."

Then, adding to the mystique: "IKL is a special purpose investment company representing significant investors based in the US and several other countries."

Besides the 46 million share placement, and the 21 million shares from the principals, IKL will take a $14.72 million convertible note (whose terms were not made public yesterday).

One investor said Senetas shareholders would have been buoyed at the news that a placement had been done above the market price, only to discover, little over an hour later, an earnings downgrade.

Senetas, which made a $1.2 million net profit for the first half last year, conceded this year's first half would be a loss of $1.5 million to a $400,000 profit before tax.