Investor's Champion Blog
Provides refreshingly forthright, independent comment on predominantly small cap companies and specialist investment funds. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses.

SMALLBONE – another black mark for AIM

Today’s announcement from Smallbone that the financial package announced less than a month ago would now not be sufficient certainly came as a surprise to me. After all, the eponymous Executive Chairman and Chief Executive (there's a lesson here!) only announced on 6th February that the committed financing package would provide ‘the flexibility to ensure that the Group can maintain its pre-eminent market position through these tough conditions’ and that he remained ‘confident in the Group's future performance in the longer term." You may well ask how long is long term, in the case of Smallbone it’s certainly less than a month!

Today’s announcement stated that due to a difficulty in forecasting future working capital commitments their life as an independent business is drawing to a close and they now need to be part of a larger group, with greater balance sheet strength – and new management?.

I am staggered at the turn of events.

It’s a mystery how they could have proceeded with the acquisition of Christopher Peacock Cabinetry in September 2008 (initial consideration US$8m cash and US$4.5m in equity at £1.11 per share - always unlucky!) when the slowdown was already upon us and cash probably tight?

How can they have underestimated their cash requirements to such an extent that a financing package arranged only 1month ago was now deemed inadequate?

Yet another black mark for AIM and a lesson for sellers never to accept shares at £1.11!


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