Woodbois (LON: WBI) shares are up 14% this morning on the news that they've been able to sort out their capital position. There's been a cost to this of course but then there always is - they've had to dilute everyone else by selling 30% and change of the company to the new investors. But if that's the price of survival then that's the price of survival.
As we say, we've a certain sympathy for the problems all started at Woodbois with: ““Woodgroup ApS has various banking arrangements with Sydbank, including the $6m Facility that was fully utilised and an ancillary account with a cash balance of $3.1 million. Sydbank have a floating charge against the assets of Woodgroup ApS and have offset this $3.1 million in partial repayment of the Facility.” Well, OK. But it was only a month ago that Woodbois raised $3 million in new capital through a rights issue. Which is what that $3 million in the ancillary account was and which has been collected by Sydbank. That is, the rights issue just paid down the debt. And that's the real reason the shares are down 60% and more this morning. Woodbois has already done the obvious thing to gain more financing, that rights issue, and it's not solved the problem in the slightest. So, what can it do next?”
What Woodbois did was struggle on for a bit and then sought permission for a rights issue: “Woodbois (LON: WBI) shares are down another 23% this morning on the announcement that they'd like to have a general meeting. Which, if it were just that, could be thought of as a bit of an over-reaction to the news. But of course it's not just that, it's the reason they want to have the general meeting that matters. The suggestion is that the board should be given the power to issue more shares. More than that, they need such permission even at today's horrendously low price.”
Woodbois share price from London Stock Exchange
As we can see that really crashed the Woodbois share price. At which point, today's announcement: “Hugh Wade-Jones has subscribed through his investment vehicle CHCH Ventures, which will own 21.7% of the voting shares of Woodbois following Admission (as defined below). He is the Founder of Enness Global, a leading debt-advisory business, and is also founder of Guernsey based private debt specialist Tenn Capital, a JV Partnership with US Hedge Fund Elliott Management, which offers specialised debt solutions for complex transactions. John Scott has also subscribed and will own 10.85% of the voting shares following Admission. John has built the Scott Group over the last 32 years into one of Scotland's most successful and sustainable businesses with a turnover in excess of $350m per annum and employing over 1,300 people. He has a wide range of business interests and has won numerous awards.”
That's 30% and change of the company gone for half a pence a share. Still, it does transform the balance sheet, gets the bank off their backs, gives them some working capital. As we say, we have some sympathy with them - they have a rights issue and the bank just takes the money - but not enough sympathy to want to invest in them.
