Gordon Dadds Share Discussion Threads

[typo56] 25/1/2019 09:03

When to they have access to the £10m? Presumably they can't spend it until the placing resolution is passed on 11 Feb? If it were to get voted down, what then?

[jonwig] 25/1/2019 08:53

gopher - it's possible they discovered on Wednesday evening (23rd) that they needed £10m by the end of Thursday. Hence they cobbled a rushed statement out Thursday morning and had their NOMAD prepare a legal circular through Thursday. (It wasn't on the website when I looked.)

At best it doesn't inspire confidence, at worst there's a lot more than meets the eye.

[gopher] 25/1/2019 08:41

Thanks all some very good points

Jonwig suspect you are correct but no excuse for lack of a circular, drafting documents is what law firms do. Markie7 excellent point re people firm - you depend on people 100%.

All in all this action shows the firm is not one for private investors which is disappointing. My trading rule is to react to the news quickly so sold at 142 for a 6% loss on purchase. There have been so many blow ups on AIM that start out with a surprise piece of negative news that it is better to limit downside

[jonwig] 25/1/2019 08:22

Markie - yes, you're right there, but there is a counterexample in Gateley [GTLY] which seems to have managed the transition to PLC very well, and has proceeded cautiously. Certainly not behaving like a python, swallowing prey bigger than itself! But even pythons only need one big meal a year, this company seems to be after its next dinner already.

[markie7] 25/1/2019 07:36

The issue here now is that in top of the inevitable risks in buying people businesses like law firms, shareholders now have to consider the risk of the board doing random acts like this. There is now underlying risk of discounted fundraises at times that look odd. So your investment can fall by 30% at any time. One to avoid. Erratic behaviour never a good sign. There is scope to consolidate the legal market I think, but needs to be done by boards that have done roll ups before, not by over promoted lawyers like this lot seem to be.

[typo56] 25/1/2019 07:13

From RNS last night

"A Circular explaining the background to and reasons for the Placing and containing the Notice of General Meeting is expected to be posted to Shareholders shortly. A copy of the Circular and Notice of General Meeting will thereafter be made available on the Company's website: "

I can't see the Circular yet. I wonder if "the background to and reasons" will be more than a cut and paste of yesterday's Proposed placing RNS.

[jonwig] 25/1/2019 06:53

gopher - what most (all) PIs will notice is that their shareholding has fallen in value by 25%! And it begs the obvious question: if the placing was oversubscribed at 140p, wouldn't it still have succeeded at 150p, 160p?

In answer to your last question, the company probably approached its existing shareholders with, "We need to raise £X by lunchtime tomorrow, what price would you pay to get it away?"

The reasons given by the company for raising the cash don't convince me. As others have pointed out, there may have been unexpected problems with satisfying members' interests.

[gopher] 24/1/2019 23:39

Read the RNS - Announcement says bookbuild at minimum price of 140p, annoucement 2 say ovesubscibed and bookbuild closed. Announcement 3 says succesful at 140p.

I am not totally against this type of exercise, its cheap but it does disadvantage private investors who are excluded and is dilutive depending on the price discount say 6% in this isntance.

is it a poor sign they achieved only 140p or a good sign the bookbuild closed at 10:44 oversubscibed. No idea as not a city insider.

[bbluesky] 24/1/2019 21:53

"Placed into administration" x quite a few...PIs forced to join the party with deeply discounted placing. Is there a style to the company?

[paleje] 24/1/2019 15:02

IC, which has been staunchly supportive, has suspended its rating and put 'under review'. Not saying there's a problem, they usually publish revised opinion within a couple of days.

[basem1] 24/1/2019 14:52

They've probably got a further deal lined up that's too good to be true

[acropolis1728] 24/1/2019 13:17

It talks about 22 partners moving across (not the original 24)and that they are funding their capital and current accounts. Lets say about 500k each. Not only that but they have to deal with partners abroad in the new international network. They will also have capital accounts in the old Ince (now Blue)and will have the bank breathing down their neck. They have to be recompensated for their capital counts as well otherwsie there is no incentive to be in the IGD network. That is likely to be by way of non refundable loans. There may be a similar number of partners in that international network. I think IGD may also pay off some ex partners who are of value or have retired (as opposed to resigned). That all costs money. No idea but hey its good to speculate.

[acropolis1728] 24/1/2019 13:17

It talks about 22 partners moving across (not the original 24)and that they are funding their capital and current accounts. Lets say about 500k each. Not only that but they have to deal with partners abroad in the new international network. They will also have capital accounts in the old Ince (now Blue)and will have the bank breathing down their neck. They have to be recompensated for their capital counts as well otherwsie there is no incentive to be in the IGD network. That is likely to be by way of non refundable loans. There may be a similar number of partners in that international network. I think IGD may also pay off some ex partners who are of value or have retired (as opposed to resigned). That all costs money. No idea but hey its good to speculate.

[jonwig] 24/1/2019 12:52

Typo - I meant (by consolidate) actually integrating the two companies, which takes a lot of management time.

[typo56] 24/1/2019 11:57

jonwig - What I don't understand is why in today's RNS are there so many paragraphs about "The Acquisition". Wasn't "The Acquisition" already funded by the GBP6 million Term Loan and GBP6.5 million Revolving Credit Facility? Does it involve today's £10m placing?

Elsewhere it says:-

"The Company intends to use the proceeds together with its existing cash resources and debt facilities to strengthen its balance sheet in order to remain agile and move quickly on its acquisition strategy."

That's a sizeable chunk of the company to have on reserve, if it really is available on reserve.

[battlebus2] 24/1/2019 11:55

Book build complete and oversubscribed

[typo56] 24/1/2019 11:49

I see the CFO (Chris Yates) was previously FD at Pires Investments (PIRI) (prevously named Oak Holdings). He was also non-exec at Kennedy Ventures (now Kazera Global - KZG).

[jonwig] 24/1/2019 11:35

Typo - I thought it was to ready themselves for future acquisitions, which seems implausible as well as bad strategy: acquire then consolidate, surely? And of course that doesn't explain why they felt such a discount was needed.

Summat oop?

[elmfield] 24/1/2019 10:59

The only saving grace is the amount of money they
have in the firm so will go with it for now..

[typo56] 24/1/2019 10:50

I may be misreading but today's RNS looks like it's been cheekily dressed up to make it look like the £10m is being raised to fund the Ince acquisition. That's not the case though, is it?

I don't see any mention of a possible placing on the completion of acquisition RNS, issued after hours on 31 Dec.

Why should PIs trust them if they do 25% placings at 26% discounts without warning and without preemption rights?

Very AIM!

[alanxx] 24/1/2019 09:41

Nothing for the small shareholders except a loss but I bet a few cheap shares find their way to the Partners !!!!!!!!

[jim digriz] 24/1/2019 08:58

Sigh, it's such a common problem that growing companies keeping diluting themselves but it is fair game here I guess seeing as they really have digested a big mouthful and will need way more working capital than they'll get out of short term trading profits... it would be good if this doesn't become a regular occurrence though.

[battlebus2] 24/1/2019 08:31

Raising the capital in it's self isn't a bad thing but the discount below IPO price has to be seen as a negative...

[basem1] 24/1/2019 07:59

A huge own goal, glad I'm out

[allonblack] 24/1/2019 07:21

Looks like shareholders give the cash and members take it. Good luck with this one. It will be cheap for a long time.