Baltimore Technologies will announce a large share placing today to complete its acquisition of Content Technologies and to raise funds for further expansion. The share price fell sharply in London and New York yesterday on speculation about the size and the pricing of the placing.
When trading opened in London Baltimore shares dropped by 9 per cent to 465p sterling on a turnover of 3.4 million shares. During the day the shares continued to slide. By close of trading in London the shares were down 13 per cent down at 454.5p. On the Nasdaq in New York the shares opened about 7 per cent down on overnight levels at $13-1/4.
The Baltimore share placing is not unexpected - it was flagged in September when the company announced its acquisition of the US company Content Technologies. But Baltimore shares have fallen sharply since that placing was announced and the company will now have to issue more shares to raise the target of "up to $100 million" set in September. At the same time the fall in its share price means that Baltimore will pay less for Content than was anticipated in September. Baltimore is paying for Content by issuing some 91 million Baltimore shares to the Content shareholders. When the deal was announced Baltimore shares were at 772p sterling. At that price Content would have cost the company around £702.5 million sterling. At last night's closing price of 454.5p the cost of Content has fallen to £414 million.
A Baltimore spokesman declined yesterday to disclose the number of shares being placed or the pricing involved. The placing details will be announced "tomorrow or the next day", he said. During the day market sources in the UK speculated that the number of shares to be placed would range between 10 million and 41 million shares. US corporate advisers to the company were said to be sounding out the market in a book building exercise ahead of the placing. A Baltimore spokesman rejected speculation that company directors were selling shares in the placing. Some of the original venture capital investors in Baltimore are expected to sell shares in the placing.
When the Content deal was announced in September Baltimore said that between 17 million and 24 million of the 91 million shares issued to Content shareholders would be sold for them though an institutional placing while Baltimore would raise up to $100 million in a simultaneous placing.
The pricing of the shares in the placing will be based on last night's London closing price of 454.5p sterling. At current market price the discount is expected to be small and the share could be placed at between 440p and 445p.
If Baltimore wants to raise the full $100 million it would have to place about 16 million shares based on a 440p placing price. With the 17 to 24 million shares to be placed for Content shareholders, the placing could involved a total of between 33 to 40 million Baltimore shares or just around 10 per cent of the company's issued share capital.
Market sources speculated last night that the Baltimore share price could show some recovery as soon as the overhang caused by the placing is removed. ABN AMRO analyst Ms Jemma Houlihan rated the share a "buying opportunity" at current price levels.
