Corero tumbles on placing news

14th Jul 2010 08:47

Software company Corero slumped today on news it is raising £6.5m from a placing and subscription at 25p a share and selling its profit-making Financial Markets division. The AIM-listed business, which focuses on the banking, securities and education markets, says finnCap has conditionally placed up to 8m shares worth £2m, while investors have conditionally agreed to subscribe for 18m shares to raise £4.5m.Brokerhorse Limited, a subsidiary of Rivington Street Holdings, is assuming liability for £2m of Corero's 8% convertible unsecured redeemable loan stock (CULS) as payment for the Financial Markets unit."These transactions enable the company to realise value from the sale of the Financial Markets division and the proposed conversion of the remaining loan stock to equity will mean the company will be debt free," chairman Peter Waller explained."The injection of £6.5m will allow the company to invest in, grow and better optimise the Business Systems division as well as to focus on developing a network security solutions business."Corero had been unable to identify a source of additional funds, largely due to the £4m of CULS "making the company appear unattractive to new equity or debt investors, because of the dilution which would arise on conversion or the perceived lack of sufficient funds to permit redemption". The Financial Markets business made £350,000 of trading profit and £150,000 profit before tax in 2009.