Sportech (LON: SPO) (OTC: SPOZD) shares should change markedly in value today. SPO is also doing something we've not seen before - a deliberate attempt to shake out all of the small shareholders in the company. This is, as we say, entirely deliberate, it's the point and purpose of what is being done. To reduce the shareholder base from 3,100 or so shareholders down to perhaps 120. Which is rather fun really, to see something as yet unseen, no?
The business itself is an online betting company, one that was created on the foundations of the old football pools businesses. At one point it owned Littlewoods, Zetters and so on for example. It was also very early into the online poker business. Given the current £18 million or so market capitalisation it's not been able to keep up with the markets but, you know, that happens sometimes.
What has happened though is that over time - and deals and market moves - the shareholder base has become, numerically at least, dominated by those with tiny, tiny, holdings. This costs the company rather a lot to service - £250k over 5 years, so they say. That's the cost of running the register, keeping everyone informed about the accounts and so on. Some cure for this would be nice - but people can't just sell their shares into the market either. Because the holdings are so small that they might not even cover dealing costs. So, something else, something interesting, is required.
Sportech share price from London Stock ExchangeThat is to have a 10,000 for one share consolidation, or reverse stock split. This will then be followed by a 1,000 for 1 stock split, leaving the end result as being a 10 for 1 consolidation. Which all sounds a little silly until we grasp this point: “To effect the Share Consolidation, the Company will issue one ordinary share of £100 each ("Post-Consolidation Ordinary Shares") for every 10,000 Existing Ordinary Shares. As the Company cannot issue fractions of shares, no Existing Shareholder will be entitled to a fraction of a Post-Consolidation Ordinary Share. Instead, their entitlement will be rounded down to the nearest whole number of Post-Consolidation Ordinary Shares. As a result, Existing Shareholders who hold fewer than 10,000 Existing Ordinary Shares at the record date will not be entitled to any Post-Consolidation Ordinary Shares in connection with the Share Consolidation and will, therefore, cease to be a shareholder of the Company following the Share Consolidation.”
Obviously, those fractions will be sold at the market price and the monies returned to those now no longer shareholders.
We're deeply unsure whether this has any implications at all for us all as traders - other than the end result of a 1,000% increase in the Sportech share price of course - but do think it interesting. We've never actually seen someone shaking the shareholder register like a rug, to get the dust out, before. But that's effectively what is happening here.
