Craneware (CRW) - pre-emption rights

A couple of days ago I woke up to a bit of a shock. CRW had made an unannounced placing of shares - at about 10% discount to market value - worth about 23% of its existing share capital, to help fund the takeover of a company valued at roughly half CRW’s EV. Does anyone have a similar example of such disrespect for shareholders? The management has to date focused on organic growth. I hope they suddenly acquire the ability to manage a major acquisition like this

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Hi Diogenes,

Not quite sure whether the disrespect is due to the price discount, the number of shares to be issued or the acquisition itself – probably all three!

CRW does have form here. The firm announced a 20% placing during 2020, but the placing was cancelled the next day as the proposed acquisition target agreed to a different bid.

This latest placing is not dependent on the acquisition completing, and was structured via a ‘cash box’:

The Placing, which is not conditional upon the completion of the Acquisition and is not subject to approval by the Company’s shareholders , is subject to the terms and conditions set out in the Appendix.

The Placing Shares, if issued, will be fully paid and will rank pari passu in all respects with each other and with the existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of issue (including any final dividend for the year to 30 June 2021, which the Board currently expects to announce in September 2021). The Placing will be effected by way of a cash box structure .

The Company acknowledges that it is seeking to issue Placing Shares representing approximately 23 per cent. of its existing issued ordinary share capital on a non pre-emptive basis and has therefore consulted, where possible, with the Company’s major institutional shareholders ahead of this Announcement. The Placing structure has been chosen as it reduces the execution risk in respect of the Acquisition and minimises cost, time to completion and use of management time.

More on cash boxes here.

I think placings, especially on AIM, have simply become a general risk of investing. Pre-emption rights appear to have disappeared and ordinary investors, if they’re lucky, have to make do with the crumbs left on PrimaryBid. Maybe best all round to avoid companies that need money to survive or acquire. From memory, the only companies I have owned in the last c15 years that have undertaken any sort of share placing are Tasty and Johnston Press.

CRW raised money at £22 and the shares now trade at c£21, so anyone can now buy below what the placing participants paid if they so wish.