Beacham ou t of the money
But strategic investor remains interested
BEACHAM CAPITAL has turned down its options on 80m shares in struggling technology group Beget Holdings because the stock simply is too far out of the money. In 2005 Beacham offered Beget a funding lifeline by agreeing to an option to subscribe for 200m shares staggered over a four-year period.
Beacham subscribed for 40m Beget shares at 3c/share at end-August 2005, another 40m at 6c/ share before end-August 2006 and 40m at 12c/ share in 2007. While Beget’s annual report shows Beacham holding just more than 40m shares, Beacham executive Alan Altshuler says a significant holding of Beget shares is held by Beacham (though not under Beacham’s name).
Finweek would then estimate Beacham-aligned entities currently hold 120m shares in Beget, equivalent to a stake of roughly 15% in the company. While Beacham has converted its options over the past two years at prices well in excess of Beget’s share price, it seems the investment company didn’t have the stomach to go through with the four-year option arrangement.
Altshuler confirms Beacham didn’t take up its last tranche of options due at end-August this year. The last tranche offered 80m shares at 18c/share. Altshuler says the option was “too far out of the money” with Beget currently trading between 2c and 3c on the JSE.
Beacham would have forked out over R14m to take up the last tranche of Beget options – a transaction that would represent in value more than half of Beget’s current R23m market capitalisation. To date, Beacham has invested almost R8,5m into Beget via the option arrangement.
However, Altshuler is quick to counter any suggestions that Beacham – which holds a 7,4% stake in AltX-listed convergent technology company Celcom – has lost interest in Beget. He says Beacham intends sticking around at Beget, noting: “There’s a lot of interesting stuff happening at the company.”
Of course, there are two ways of looking at Beacham’s reluctance to convert its Beget options. The bearish view is that ultimately Beacham feels Beget – which is now short of R23m in potential funding – isn’t going to muster sufficient operational strength over the next few years to meaningfully build shareholder value in the short to medium term.
The second view is that Beacham is comfortable
enough to stay on board Beget without completing its funding obligations. That would mean Beacham believes Beget – which has underperformed since listing in 2002 – can generate sufficient cash flow from its revamped and newer technology operations, such as SMM Telematics.
Punters may also be wondering whether Beacham could make up for the funding shortfall by looking to facilitate closer co-operation between Beget and Celcom – which, broadly speaking, may have some complementary convergent thrusts.
But Altshuler says Beacham hasn’t given any special thought to getting Celcom and Beget chatting.