Pure Wafer has certainly been through the mill. It was founded in 2000 by a couple of Brits who had solid chipmaking experience and persuaded venture capitalist Apax, plus various government offices, to finance a high-tech plant in South Wales to recondition silicon wafers. This is a specialist service required by manufacturers of semiconductors. Pure floated in 2004 at 145p and the shares touched 300p in 2007. Then it spent £6m on plant in Arizona which had been opened by a rival that had subsequently lost its way.
I could not say whether it was the faraway acquisition or just tough times in its sector, but things soon went wrong. Within a year Pure said it could no longer comply with its loan covenants. The shares hit 5p and were later suspended. In 2009, the main lender, RBS, agreed to put up another £2m provided directors put up £250,000 (as an incentive, the directors and RBS got some pretty juicy warrants). At the same time, all shareholders were invited to participate in an open offer to raise £2m at 2p per share - the same price as the directors paid. This raised £1.16m, which was a pretty enthusiastic response in the circumstances.
Although a few institutional shareholders stepped up to the plate, it seems clear that private investors were the backbone of this capital raising. In 2007, Pure had 10 shareholders at the level of 3 per cent or more; between them they held 65 per cent of its shares. By 2009, there were only four declarable institutional shareholders and they were down to 43 per cent. Bye bye Goldman, New Star, Majedie, Jupiter, Capital Group, Standard Life, Royal London.
Pure came through. In the year to June 2012, sales were up 20 per cent and there was sufficient operating profit to cover almost half the interest bill. The bulletin boards hummed with cheering private investors. The shares crept up. After spending most of last year at 3p, they moved steadily forwards in 2012 to 7p.
It would be interesting to know when Pure and its adviser, WH Ireland, began to think about the price of the current placing, a monster that will virtually double the number of shares in issue. The price they settled at is 3.5p. Of course this would be immaterial if this offer, like the last one, was an open offer. But it isn't. It's a cosy placing with a so far anonymous list of institutions. Well, it's mainly a placing. There is a face-saving segment of the issue - 14m shares - for which ordinary shareholders may apply.
Let's put that in context. In 2009 when Pure was at death's door, an open offer to shareholders raised £1.2m. Now it's in the recovery ward, the same group is being restricted to a maximum subscription of less than £500,000. Meanwhile, institutional placees will dole out £4m for 114m shares. 'Step this way, sir. Grovel, grovel. Would you like sauce with that?'
I have to say I am inclined to agree with the reader who contacted me to say that this is gratuitous. And I really can't quite figure out why Pure and WH Ireland are being so stingy. Given the extra hoops they had to go through to have any open offer, why make it so miserably mean that it will attract this kind of criticism? Why not have no open offer and just plead that expense and the need for speed and certainty made it impossible? I sought to ask this question of WH Ireland and Pure, but to no avail.
I suppose they had to deal with institutional shareholders saying that if they were going to be bothered with this at all, they had to have triple portions but they would only pay 3.5p. No doubt there was a bit of an eyeballing session. But they really didn't do very well in it.
Now all you Pure Wafer shareholders: don't let me down. If you believe in the company, for heaven's sake make sure you buy those shares you're being offered.
