Hard-pressed corporate radio services provider 7digital Group PLC (LON:7DIG) has persuaded investors to subscribe for new shares at a small premium.
The shares, which closed at 0.19p last night, shot up 24% to 0.23p after the company revealed it had raised £1.88mln through the issue of shares at 0.2p a pop to new and existing investors.
Non-executive chairman Tamir Koch and fellow director David Lazarus have indicated they will arrange a credit facility for the group of £1.0mln, thus increasing the funds raised to £2.88mln.
The board said it is confident that this financing secures the company's working capital needs to reach for the first-time operational profitability by mid-2020.
Shmuel Koch Holdings, whose directors are Ruth Koch and Yaron Asher Koch (Tamir Koch's mother and brother respectively), has agreed to subscribe for 20.8mln shares, giving the company a stake of around 19.1% in 7digital.
Magic Investments, which counts David Lazarus as a director, has agreed to subscribe for 199.6mln subscription shares, giving it a stake of around 32.0%.
Normally, a single party taking its stake above 30% would be obliged to launch a takeover bid for the company at the same price at which it bought the shares that took its stake over 30%; however, Schmuel Koch and Magic Investments are deemed to be acting as a concert party and as their combined stakes account for more than 50% of the issued share capital they are under no obligation to offer to buy the shares in 7digital that they do not already own.
"We are delighted to have secured further funding from our supportive chairman, Tamir Koch and non-executive director David Lazurus as well as new shareholders,” said Mark Foster, the senior independent non-executive director of 7digital.
“This financing secures the company's working capital needs as 7Digital prepares itself to embark on its next phase of development,” he said.
Paul Langworthy, the chief executive officer of 7digital, said that having reduced its operational costs and secured new funding, the company is in a good position to benefit from the expansion in streaming services in the music industry.
“With the additional financing we are able to implement our plan to build a new partner programme to drive new customer growth; expand sales and support in US Market as well as invest in market-driven product development thereby delivering sustained growth and shareholder value,” Langworthy said.
The company could certainly do with a change of direction; in the first half of 2019, revenue from continuing operations slumped to £5.59mln from £9,22mln the year before.
The loss before tax widened slightly to £2.82mln from £2.73mln.
"Looking ahead, our revised core strategy, expected incremental revenue and healthy commercial pipeline mean the board and management look forward to the future with confidence," Langworthy said.