Addvalue's private placements issued at lower than market price prompts shareholders' queries

MAINBOARD-listed Addvalue Technologies is in favour of raising funds through private placements given that it is faster and more certain than a rights issue unde the current "challenging capital market conditions aggravated by the Covid-19 pandemic".

The communications technology products developer had issued several private placements that are lower than market prices, prompting shareholders' to query why the company has not considered giving a rights issue with the same discount price to shareholders.

In response to shareholders' queries on Sunday, Addvalue said in a statement that a private placement takes under two months to conclude while a rights issue may take up to six months or longer.

"Besides, unlike the uncertainty posed by a rights issue (if it is not underwritten as will most probably be the case with the company since underwriters for such an issue by the company are hard to secure unless at a hefty price), a private placement is more likely to be concluded with certainty of the amount targeted to be raised," said Addvalue in a statement.

That said, the company said that it has noted the subscription interest of the shareholders for a rights issue, and will look into such a fundraising exercise when "speed to completion can be tolerated and market conditions are conducive to do so".

Shareholders questioned why the company has struggled to obtain financial institutional backing with a lack of progress on several deals announced involving Tiancheng Hengcheng (Beijing) Technology, Bright Star Tech and Rain Asia Pacific.

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In response, Addvalue said that the company is a human-centric rather than an asset-based entity with no significant tangible assets at all and operates globally in a complex satellite-related business sector.

In addition, there are developmental demands to be met at the expense of the company's bottom line in the near-term before IP (intellectual properties) assets can start to generate recurring revenue streams upon their commercialisation. As a result, the company will always face the uphill task in gaining backings from financial institutions, said Addvalue.

This comes as financial institutions tend to appraise their financing and investment decisions based on the strength of the backing of tangible assets and/or sustained profits to be realised within the immediate future.

Addvalue also noted that executive directors had not received any pay increment for the past few years. They had in fact volunteered for a pay cut in the financial year ended Mar 31, 2019. The pay cut that was reinstated in FY2020 gave the perception of a pay increment, said Addvalue.

Shares of Addvalue closed on Friday at 2.4 Singapore cents, up 0.1 Singapore cent or 4.6 per cent.