Collectibles group Stanley Gibbons (SGI) has announced a placing and open offer to raise £13m from investors to provide immediate working capital and ensure the near-term viability of the group. This, along with other placings announced by a selection of companies in recent weeks, has prompted some retail investors to question companies' decisions to conduct placings, thus potentially diluting existing retail shareholders' stakes, as opposed to rights issues which allow all investors to offset some of that dilution.
A spokesperson for Stanley Gibbons said the circumstances meant there was an "urgency" with which the funds were needed and therefore there was "not sufficient time or certainty" to pursue a rights issue. It would also have cost "significantly more" and taken "significantly longer". The group also believes that, by making the fundraising partly via an open offer and by allowing excess applications for shares not taken up by others, they have protected pre-emption rights "to the fullest extent possible", while "securing the future of the company".
The Investment Association also has a view on this issue. Galina Dimitrova, director of capital markets, said the "advantage" of a placing is that it is a "quick, simple and inexpensive method" of raising capital. But the body acknowledged placings can be "unfair" to existing shareholders (retail or institutional), as companies looking for a quick injection of cash can directly tap up their largest shareholders without the need of a prospectus, meaning smaller stakeholders are excluded and ultimately diluted.
