On the ASX, according to what I was reading, the company decides on the number of shares to release, and their value. If I read the rules correctly, the maximum discount the company can offer is 20% below the average share price of the 5 days trading prior to the CR announcement. That average for IWG is 28.1c, which means new shares can be sold at a minimum price of about 19.5c.
Of course, the company does not have to offer such a large discount, but with the share price falling steadily for over a month, and no significant news of products or revenue, I have a feeling a 20% discount was already there for anyone prepared to wait a week or two.
But a capital raising it is, so do we get a prospectus telling us what they might do with the money they raise? The CEO got his loan paid back last time they raised money. That is looking like a smart move given the chance of him getting it paid back from, say, sales revenue. Will the rest of the board insist on having their loans paid back from share holder's funds, do you think?
If there is a prospectus, what is likely to be in it? The IPO one (actually the update from 15/12/14) said they would spend $1.725m on sales and marketing. In fact, according to the last two quartlerly accounts they have filed, they spent $45,000 on sales and marketing since the IPO. What happened to the other $1.68m? Spent it and lost it, it seems.
So they need to find another chunk of money from somewhere. How can they persuade anyone with a brain to give them yet more? Dress it up, I suppose. Use a standard excuse like "it is taking longer than expected to convert leads to revenue..."? Will they get away with that? If there is one thing I have learnt from following the IWG story, it is that there are an awful lot of gullible people out there, so they might just get another result on the board.
This appears to be a crunch point for IWG. If they can find enough investors prepared to give them more money to lose, they can probably keep going for another year or two. If they can not find those investors, I have a feeling the game may well be up.
IWG Price at posting:
25.0¢ Sentiment: None Disclosure: Not Held
