asics investigating their accounts?

Chemeq raising comes under the microscope
By Rebecca Urban
August 19, 2004

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The Australian Securities and Investments Commission and the Australian Stock Exchange are believed to be closely monitoring biotechnology company Chemeq as it seeks to raise more than $50 million through a placement and rights issue.

Ignoring widespread speculation about its finances, the Perth-based company yesterday announced it had received regulatory approval from South Africa for the sale of its antibiotic replacement drug for poultry.

While the news augurs well for the company, institutional interest in the capital raising is believed to be lukewarm.

Ord Minnett has been promoting a book-build, offering heavily discounted shares in the $2.40 to $2.75 range to raise up to $14 million. The remaining $40 million will be raised by way of a non-renounceable rights issue.

Allowing a week to plug the offer, co-head of corporate finance Greg Pye said Chemeq was traditionally a "mum and dad" stock and educating institutions about its prospects could take some time.

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One fund manager said yesterday: "We're not particularly interested and we understand there hasn't been a lot of institutional support."

A briefing document on the capital raising has revealed that $7.5 million of current assets at the end of the financial year were outweighed by current liabilities of $11.7 million.

The shares have been suspended from trading since Monday. They last closed at $3.42.

An ASX spokesman yesterday confirmed that it had previously asked the company to clarify its cash-flow position, and would decide whether it had further concerns once the anticipated announcement about the capital raising was made to the market.

"They are doing things by the book. It's quite appropriate that they not be trading while they resolve these issues," he said.

ASIC is believed to be investigating whether it has authority to take any action.A spokeswoman for ASIC would only say she was aware of the issues facing the company. However, ASIC is believed to be investigating whether it has authority to take any action against the company.

www.theage.com.au