Concha PLC (LON:CHA) today tried to justify its investment in advertising technology company Ve Interactive Limited after its value plunged following a rescue deal last week.
Concha, which today reported an eye-watering £3.0mln half-year loss, paid £4.0mln for a 0.43% stake in Ve Interactive in March 2016 when it touted it as an “exiting investment opportunity”. At the time, Ve was valued at £930mln.
However, The Telegraph reported at the weekend that Ve Interactive’s value had fallen to £300mln following a £3.0mln emergency cash injection, led by Scottish billionaire Doug Barrowman’s Aston Ventures, last week.
The former chairman of ARM Holdings (LON:ARM), Stuart Chambers, has since decided to back out of plans to chair the struggling firm and has quit as an advisor to the company.
His resignation came shortly after the founder and chief executive of Ve Interactive, David Brown, stepped down earlier in March just days after the company failed to meet payroll on time.
Brown launched the business in 2009 after his marketing company, Serious, failed not long after he left the company.
Chambers will be replaced by Barrowman at the Ve, which helps retailers place ads online and offers them web tools that encourage shoppers to spend more.
Alongside its full year results, Concha defended its investment in Ve, saying its “initial view and its potential remain the same”.
The group believes the new management team’s efforts to restructure the business will see Ve return to growth, though admits it will not be “without its challenges”.
Concha expects funds for Ve’s planned restructuring will be secured through a rights issue on top of what its received through the rescue deal.
“The technology that underpins its business is proven and its vision to use technology to overcome the common challenge faced by all online businesses in respect of expanding and converting customers without flaw,” Concha said.
“Whilst recent events will no doubt impact the perception of the investment opportunity Ve represents, the board believes that this decisive action will accelerate Ve's timetable to profitability and in turn provide an earlier exit opportunity than would otherwise have been possible."
Concha said Ve will need to shed its start-up culture, rationalise its operating base and focus on the introduction of revenue enhancing marketing and technology and advertising product initiatives that are expected to drive the business to break-even in 2017.
The group added that funding proposals are still being negotiated and could be subject to change.
Concha reported a loss before tax of £3.0mlnin the six months to 31 December, compared to a £384,000 in the year-ago period, on flat revenue of £8,000.
Shares dropped 5.26% to 0.45p in morning trading.