Alec Hogg
boardroom talk
With well over two million shares traded in Ixchange stock this week, it’s clear some rather hefty bets are being laid ahead of what promises to be one of the most important few days in the wannabe world-leading software group’s history. After the past year’s share price collapse from R28 to R1,50, no surprise to see a waning in the confidence of once steadfast supporters. But selling out could be compounding the now obvious mistake of having bought the shares a year ago.
The most recent crack in the Ixchange share price led from a disclosure in the half-year financial results of the existence of a put option held by the former owners of the group’s biggest subsidiary FrontRange Solutions. Analysts were concerned that the option, which entitles them to sell their remaining shares to Ixchange, would wipe out the bulk of the group’s $50-million cash pile.
Ixchange chief Derek Kreunen discounts any chance of such problems as there is no specified price at which his group must buy the shares it will be done, rather, at a level consistent with today’s general market value. Also, he reckons there are plenty of private equity companies trying to buy a stake in FrontRange Solutions, so the group should have little problem broking a deal that has no impact on its cash position. Either way, shareholders don’t have long to wait for finality on this issue. The put option expires tomorrow, Saturday March 31.
That’s not the only critical bit of news for Ixchange shareholders. The stock is trading under a “cautionary”, after warning it was in negotiations that could have an impact on the share price. Not even a whisper from inside on what form the discussions are taking, but common sense suggests it has to involve Ability, the smaller of the two major divisions, which accounts for little over 10% of the group revenues.
The most likely route would be the introduction of an equity partner into Ability, with Ixchange reducing its exposure to this rapidly expanding but still very much loss-making operation which recently relocated its head office to Atlanta in the United States. Don’t rule out a total sale of Ability, a route which hard-hit institutional investors may well prefer. In these times when focus has become critical, management will be constantly reminded that FrontRange contributes 84% of the overall revenues.
Again, there’s not long to wait. According to the Johannesburg Stock Exchange rules these “cautionary” announcements need to be renewed every three to six weeks to inform shareholders of the state of negotiations (concluded/near finality/ aborted). As the original Ixchange cautionary was issued at the beginning of March, a follow-up is due any day now.