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PCG Entertainment Plc: THE INVESTMENT CASE

Game changer: Stock overhang clearance, funding boost to revive PCG Entertainment

PCG’s shares rocketed nearly 150% higher over a five-day period as a stock overhang created by its decision to draw a line under the CPDC purchase was finally cleared.
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INVESTMENT OVERVIEW: PCGE The Big Picture
PCG said it expects to receive net proceeds of approximately £0.42mln from the share sales

After a torrid year dominated by its ill-fated acquisition of games delivery platform Center Point Development Corp (CPDC), shares in online media and entertainment company PCG Entertainment Plc (LON:PCGE) finally got a boost over the past week.

PCG’s shares rocketed nearly 150% higher over a five-day period as a stock overhang created by its decision to draw a line under the CPDC purchase was finally cleared, bringing the group additional funding to plot its next course.

The group revealed yesterday that its broker, Beaufort Securities, had completed the sale of around 402.589 mln ordinary shares in the company on behalf of the CPDC purchasers, equivalent to 30.06% of the AIM-listed firm’s share capital.

READ: PCG up as share sale completes ...

PCG said that, after selling 302mln of the shares - equivalent to 22.55% of its share capital -- last week, Beaufort had sold the final chunk of 100.5mln - a 7.51% holding.

It said the shares were sold to multiple investors, none of which now hold notifiable stakes in the company.

The group said it expected to receive net proceeds of approximately £0.42mln from the share sales, around £0.3mln from last week’s tranche, and £0.12mln from the final tranche.

Nick Bryant, PGCE's  chief executive,  said: "This concludes the disposal on a very positive note, and brings additional funding into the Company.

“We look forward to reporting further good news to the markets in due course."

PCG shares were hoisted over 70% higher yesterday by the overhang clearance news, having surged around 30% on the previous Friday when the initial tranche disposal was unveiled.

One day later, the group used the share price boost to raise an extra £750,000 through a discounted placing, which saw its shares drop 35%.

The firm said Beaufort Securities had placed around 535.714 mln new ordinary shares at a price of 0.14p each, the proceeds of the placing will be used for general working capital purposes.  

Bryant said: "This sale provides the working capital the company needs to realise the opportunities we have created over the past months."

Vendor dispute …

The Asia-Pacific company revealed it had opted to sell the CPDC subsidiary on January 11 after a dispute between the unit’s vendors  and its major supplier.

The company sold CPDC to a consortium of investors, some of whom are existing shareholders of PCG, while others are thee previous owners of the company.

PCG purchased CPDC in August 2015, shelling out 114.8mln shares plus US$410,000.

It was not long, however, before PCG became entangled in a dispute between the sellers of CPDC and its major supplier.

It proved impossible to resolve the dispute amicably, and the disagreement hung over the company like a black cloud, affecting trading and preventing PCG from developing the business in the way it intended.

After a long period of negotiation, it was decided that the best solution was for PCG to cut its ties with the company.

PCG’s first-half results, reported at the end of September, saw its revenues boosted to US$8.6mln, up from US$745,000 a year earlier, with all of the growth coming from the CPDC business.

READ: Revenues soar at PCG despite dispute ...

However, the firm still posted an interim loss of US$746,000 after it was forced to write down a US$2.2mln disputed payment due from a customer, although the losses were substantially below the US$2.5mln posted for the same period a year earlier.

PCGE was upbeat then about the second half of 2016 and also told investors that it was in talks with “potential sports and media projects”.

China football …

In early November, PCGE revealed that it is to partner up with Shenzhen Tianrong Sports Culture Management Co to build a “major” football academy in China.

At the time Nick Bryant said: “This partnership…represents another significant step in China's commitment to developing world-class players by collaborating with internationally renowned partners.”

The group said that Chelsea FC and Spanish outfit RCD Espanyol had already attached their names to academies in China, and PCG intended to bring a “western football club” on board as well.

WATCH: Sport an enormous deal in China, says PCG boss ...

Football China has taken off in the past few years, with the country’s professional league attracting some of the world’s top talent with eye-watering transfer fees and wages.

On top of that, the Chinese government has introduced plans to develop the sport at a more grass roots level and is aiming to open 50,000 soccer schools by 2025.

With the CPDC debacle now in the past, investors will be keen to see where the share sale funding boost directs PGCE’s strategy next. 



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Article
November 04 2016

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PCG’s shares rocketed nearly 150% higher over a five-day period as a stock overhang created by its decision to draw a line under the CPDC purchase was finally cleared.

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