WH Ireland (LON: WHI) is that interesting thing, the stockbroker that can't make money in the stock market. Even more interesting, the wealth manager that manages to destroy wealth. We think that both of those observations are going to be really very helpful to the business in the future. However, putting sarcasm aside it is true that they're a capital markets firm and one that isn't making money at present. They're also, or they were at least, days away from having to go into orderly wind down and liquidation. So there was a certain imperative at getting these new shares out the door.
From the announcement by WH Ireland: “The Company announces it is carrying out a conditional placing to raise approximately £5.0 million, before expenses, by way of the issue of new ordinary shares in the capital of the Company (the "Placing") to certain existing shareholders and other investors at a price of 3 pence per share (the "Placing Price"). The Placing Price represents a discount of approximately 86.67 per cent. to the Closing Price of 22.5 pence per Ordinary Share on 27 July 2023,! That is a substantially discounted price there. The reason for this being “The current regulatory capital position of the Group (as at 30 June 2023) is a c.£1.9m shortfall below the current FCA regulatory capital requirement. On the basis of the adverse current and forecast trading and resultant losses, without further funding pursuant to the Placing, the SWDP would be required to be implemented on 31 July 2023.” An SWDP is a solvent wind down plan. The FCA can force a regulated business into liquidation that is, if capital falls below the required level.
WH Ireland share price from Google Finance
That announcement of the share issue was almost immediately followed by this: “Subject to the satisfaction of the conditions referred to below, the Placing has raised, in aggregate, gross proceeds of £5 million through the placing of 166,666,667 Ordinary Shares (the "Placing Shares") with certain institutional and other investors at a price of 3 pence per share (the "Placing Price").” So, the issue has succeeded, the company is saved and Huzzah!
Except, obviously enough, shareholders have been pretty hard done by. Their shares are down by that 64%. Further, they don't even get the compensatory pleasure of being able to console themselves with a profit on the rights. If the new shares were issued at 3 pence, the price is currently 8.9p, that would dull the pain. But external shareholders aren't being given the ability to subscribe for rights: “the Resolution to approve the Rule 9 Waiver” - Rule 9 is pre-emption rights. Which can indeed be waived in particularly difficult times by a majority vote of the shareholders.
We think that the issue we'd have here is that, well, we can imagine a firm realising that it's below regulatory capital levels, needing to raise more. But we'd really rather hope that a stock broker and wealth manager like WH Ireland would realise this a little more than 3 days before the necessary implementation of the wind down plan. But maybe that's just us.
