Spice i2i rights issue: Some shareholders concerned

They fear that a large rights issue will lower the company’s share price

Jo-ann Huang

joannhuang@mediacorp.com.sg

SINGAPORE

Formerly known as MediaRing, the board of directors at Spice i2i, however, received overwhelming support for their 1.37 billion shares rights issue.

But some shareholders claim that such a large rights issue will drag lower Spice i2i’s current share price of 16.5 cents.

Mr Toh Peng Teng, a shareholder of Spice i2i since 2007, told MediaCorp that other types of funding can be secured instead.

Inclusive of the 1.37 billion rights shares, Spice i2i’s entire share capital will be more than 2.7 billion shares.

Mr Toh believes that is too many shares for a small company like Spice i2i. And with current market conditions, this may render the extra shares stagnant if trading activity is limited by demand.

This may in turn stump share-price growth, he added.

“They should use internal funding instead of introducing more shares into the market at such an uncertain time.”

According to Spice i2i’s circular for the rights issue dated July 8, net proceeds of the rights issue are intended to fund working capital requirements, capital expenditure, market expansion, new product development, acquisitions and general corporate expenses.

Mr Roger Tan, vice-president of SIAS Research, noted that clarity over the use of the proceeds is lacking. “I think the biggest issue is raising capital for working capital needs, but (Spicei2i) doesn’t say what,” he said.

However, he noted that with Spice i2i’s repositioning, it may look to acquire more companies as it did since it took over MediaRing.

Recently, Spice i2i chairman Dr B K Modi pledged US$100 million ($137 million) towards a joint venture with Malaysian mobile phone makers CSL to introduce Spice’s own line of mobile phones to the Malaysian, Thailand and Indonesian markets.

India-based mobile services giant Spice Group, also chaired by the flamboyant Dr Modi, had bought a 20-per-cent stake in MediaRing for $60 million last August, making it the largest shareholder.

Dr Modi acknowledged that with Spice i2i positioning itself towards a new strategic direction,  it will naturally cause some discontent among some longtime MediaRing shareholders.

However, Dr Modi said he is looking to turn the depressed share price around. “When we bought the company it was very much in a distressed situation,” he said.

“I can only say that we are trying to bring it back but I can’t create magic to be in line with the industry we are getting in. And I think we are in the right industry.”— Detractors of Spice i2i’s $133 million rights issue raised their concerns over further share price dilution at the company’s extraordinary general meeting last Friday.

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