There’s plenty of speculation over which trade and/or financial buyer might be ready to nurse the wounded software developer Isoft back to health and chairman John Weston has appointed some eye catching names — Gleacher Shacklock and Morgan Stanley — to help him sift through the offers.
But RJH Adams, author of Capital Chronicle, makes the pertinent point that Isoft’s real issue is its depleted capital base. The business needs to raise money and the betting is that it needs to do so before year-end. The orthodox choice would be between a rights issue and an open offer, or perhaps a combination of the two — an open offer with a conditional placing.
But the choice is important. As Adams points out, British data shows that companies relying on rights issues typically underpeform for up to five years. Open offers, on the other hand, enjoy outperformance. Sadly, an isolated, financially distressed Isoft may not have enough shareholder support for anything other than an aggressively discounted rights.
Adams is one blogger worth watching — especially on Isoft. Writing as a declared shareholder, he’s posted some searing commentary over the months. This week’s post on Isoft does not carry a shareholding declaration, which indicates he has finally followed his own investment advice.