Shares in WH Ireland Group PLC (AIM:WHI), the broker and wealth manager, slumped 74% after securing £5mln of emergency funding against the backdrop of a severe downturn in UK market activity.
New stock was sold to existing and new investors at 3p per share, representing a hefty 86.67% discount to Thursday's close.
This comes in response to the protracted drop in transactional activity in the financial capital markets and the shrinkage in assets under management due to challenging market conditions.
The company stated that it does not expect significant improvements in either its Capital Markets or Wealth Management divisions in the near term, forcing it to discuss potential insolvency plans with the Financial Conduct Authority (FCA). The current regulatory capital shortfall is around £1.9mln below the FCA requirements.
Support for the share placing has been expressed by key investors in the business. TFG Asset Management UK, WH Ireland's largest shareholder, intends to participate in the placing with a contribution of between £2mln and £2.5mln.
As the placing price is lower than the current nominal value of the ordinary shares, the company is also planning a share subdivision.
In a parallel effort to stabilise its financial position, the firm is initiating a collective consultation regarding headcount reduction and considering a plan that would allow senior management to sacrifice a portion of their salaries in return for new ordinary shares at the placing price.
The initiative is expected to realise savings between £3.75mln and £4mln by the end of 2023.
The urgent capital injection is aimed at ensuring WH Ireland can continue to operate in the current market conditions. If the placing doesn't proceed successfully, the company said it will be forced to execute its solvent wind-down plan.
Shares in the company plummeted to 4.99p, an all-time low, in early trading before leveling out at around 8p.