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Tanfield – will private investors save the day?
Posted 26/08/10
Today’s announcement from Tanfield that it is trying to finalise an equity fundraising as an open offer at a substantial discount to the current share price surprised the market sending the share price down over 45% at one point.
It shouldn’t really have come as much of a surprise as management flagged the cashflow problems at the time of the interims commenting at the time that they were “reviewing alternative ways to fund the continuing cash outflow pending successful completion of the consolidation of the Electric Vehicle business which is expected to lead to a cash inflow for Tanfield.”
It has certainly been a strange few months for the Group, but following Tanfield has always been a bumpy ride.
On 10th March 2010 was news of the non-binding, conditional offer from Smith Electric Vehicles US Inc (“SEVUS”) for the Company’s Smith Electric Vehicle division for £37m in cash and an additional £33.3m contingent credit to the benefit of Tanfield in any future SEVUS IPO. However, this offer was conditional on SEVUS securing the necessary financing. Hardly a viable offer when you haven’t actually the funds to carry it off!
Tanfield granted SEVUS a four month period of exclusivity for the clarification and negotiation of this offer and time was up in July when they announced they had agreed to extend the exclusivity period for a further period of 60 days.
On 9th August 2010 came the announcement of a signing of non-binding, Heads of Terms to consolidate SEV UK and SEVUS following a review of how to ‘optimise shareholder value and a review of general market opportunities’. i.e. SEVUS couldn’t come up with the money or simply thought it was worth waiting a while longer!
It was then mooted that SEVUS had plans for a possible public offering on the NASDAQ exchange, as early as the first half of 2011.
Obama’s talk at the SEVUS plant would suggest that SEVUS has the support to carry things off.
So what’s the likely outcome?
SEVUS, a business in its infancy dependent on Tanfield’s engineering appears to have cannily moved itself into the driving seat, simply by doing nothing. There might be a lesson here for businessmen everywhere!
Since March 2010 Tanfield has continued to burn through cash to the extent that it now needs a material cash injection, in quick time, to survive the next 6 months and remain in the negotiating game with SEVUS.
Given the continuing cash outflow and going concern issues that must have been present earlier in the year it’s somewhat surprising that the auditors were able issue a clean audit opinion back in May 2010.
One look at the share register with tell you that Tanfield has a huge number of private investors as shareholders, many of whom will have ridden the share price roller coaster of the last few years – the share price was 87p in Sept 2005, over £10 in July 2007 and is currently 17p! If they want to keep Tanfield in the negotiating game with SEVUS it looks like they now have no other choice but to support the fund raising with approx £7m probably needed to see TAN through the next 12 months and give it a stronger hand in negotiations (there was a £3.2m cash outflow over 6 months to 30th June 2010). Let’s hope they are prepared to put up the dosh!
This entry was posted 1 year, 5 months ago and was filed under Tanfield.
