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The directors of media and entertainment company, Reach4Entertainment (LSE:R4E) have made good on their previous stated intention “to subscribe for new ordinary shares at the prevailing mid-market price but not less than the placing price, as soon as these (Spot & Co earn-out payment) discussions conclude”. The following reviews today’s announcement from the company on this and the investment proposition from here. This was an awful tip by me at 81p. But anyone who averaged down as I advised at 3.5p should on balance now be showing gains. I know some were panicked by others into selling at the bottom. I am sorry if you took that duff advice. The question is where to go from here.
On 12th October Reach announced it had raised working capital of £0.35 million via the issue of news shares at 4.5p each – with it “delighted with the interest and support received from existing shareholders” and “strong institutional interest”. However, as the company was deemed to be in a ‘Close Period’ due to its negotiations with the vendor of Spot & Co (the New York-based live entertainment advertising business acquired in 2008), the directors were unable to participate. With an announcement on the settlement of these negotiations a week and a half ago, it has today been announced that all of Reach4Entertainment’s directors have subscribed for new shares at the current mid-market price of 6.625p per share, for a further £75,000.
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This means all of the directors now have shares in the company – better aligning their interests with the other shareholders’ – and sees the holding of Executive Chairman David Stoller up to 18,927,358 shares, representing 25.27% of the enlarged share capital.
I apologise again for what has been a most disappointing long-term recommendation from me but, unlike some people, I kept the faith at recent lows and the shares have recovered somewhat from these to the current 6.625p. The shares announced today represent a 1.5% increase in the issued share capital and thus I continue to believe a share price of 14.5p+ valid here on an Enterprise Value/EBITDA basis.
I hope that you followed my advice to average down at 3.5p in late September as the shares are now 6.625p – a gain of almost 100%.
I continue to believe it not too late to average down and reclaim some losses on the original, very disappointing tip.
For a detailed analysis of why click here
Libertarian investment writer Tom Winnifrith writes extensively for a number of US and UK financial websites. All of that material appears on his own blog, which also carries his extensive original non financial material, at TomWinnifrith.com – for alerts on all Tom’s writings (except for that free share tip) follow him on twitter at @tomwinnifrith
Hardly ‘meaningful’ given their salaries!