London Capital Group Holdings plc (LON:LCG) shares dropped significantly after it disclosed details of a restructuring proposal on Tuesday, according to which LCG will issue shares to a company controlled by the CEO Charles-Henri Sabet. Sabet and his partners in the GLIO holding company plan to inject 10 million pounds into LCG to increase the company’s capital base and to eliminate outstanding debt.
The company plans to issue 215,245,578 subscription shares and 70,962,201 open offer shares and up to 7,096,220 underwriting commission shares, each at 5 pence per new ordinary share. Other shareholders are also offered to take in the funding, with an open offer being launched.
If the transaction is approved by shareholders at the company’s General Shareholder Meeting to be held on July 6, Charles-Henri Sabet and his partners will increase their collective direct interest in LCG from 20% to over 80%. Prior to the share subscription GLIO held an 11.41% stake in LCG, and Sabet himself owned 9.89%.
The LCG group announced that it requires an injection of ‘regulatory capital’ to support current activities and anticipated future growth. In fact, the vehicle of Sabet, GLIO, has previously invested £13mln in LCG via convertible note loan, accruing 5% interest per annum, which is still outstanding. According to LCG the proposed subscription by GLIO would enhance the company’s capital base and also reduce the company’s indebtedness.
The company adds that according to its independent directors – Nicholas Lee, Rebecca Fuller and Frank Chapman – the funding proposal is in the best interests of the company and its shareholders as a whole. LCG has been downgrading lately, its stock price falling by nearly 50% since the beginning of the year, from GBX 10.25 on Jan 4 to GBX 5.16 today.
After the news broke yesterday, LCG’s shares fell 15% from GBX 6.00p to GBX 5.10.
Earlier in April LCG published its financial metrics for the financial year 2015, posting a decline of 21% in trading revenues due to ongoing restructuring. The group has consolidated its brands Capital Spreads and London Capital Group under a single global brand and has also launched a proprietary multi-asset trading platform, LCG Trader.
The London-based LCG holding company offers online trading in forex, indices, shares, and commodities CFDs, as well as financial spread betting (for UK residents). Its fully-owned subsidiary London Capital Group Ltd (LCG) is regulated by the UK’s Financial Conduct Authority (FCA).