UPDATE: Bright Station cash crisis leads to cut price placing

The beleaguered technology group said that it has secured commitments from institutional investors to raise 12m through the issue of 270m shares at 5p each. In an effort to console shareholders, who will see their stakes considerably diluted by the placing, which is priced at a 75% discount to yesterday's closing price of 8.75p, existing investors are being offered four new shares at the placing price for every five they own. The new shares will represent 60% of the enlarged share capital.

A spokesperson for Bright Station, defended the company's decision, saying that through the open offer, shareholders are given the opportunity to limit the dilution to 30%.

He added: “This is a sector that has not been particularly adept at attracting funding at the moment; it's a buyer's market. The fact that they have raised 12m - though at a considerable discount - is a strong endorsement in itself. They could have taken another route, which would have been less in the shareholders' interests, like selling off SmartLogik, which means that [shareholders] wouldn't have reaped any potential benefits.”

This fundraising follows the collapse of a 2.5m financing with Credit Suisse First Boston, which required Bright Station's market capitalisation to be above 30m in order for the capital to be released. On news of the company's restructuring and financial squeeze on 30m April, however, shares in Bright Station collapsed, wiping off almost half its value.

Despite the proposed placing, Bright Station's cash worries are not over. In its desperation, the company, which appears to have depleted its cash reserves, is now in advanced discussions with providers of bridge financing to tide the group over until the placing funds come through. According to stock market regulations, before the placing can be launched, a prospectus must be sent to shareholders and approval must be sought at an EGM.

Bright Station's spokesperson claims that the company does not expect to dip into the bridge financing, but is setting it up as a prudent measure in case creditors demand payment, eating into funds which are needed for the ongoing operating costs of the company.

The proceeds of the placing will be focused exclusively on SmartLogik, the group's core knowledge management subsidiary. Meanwhile, what remains of Sparza and OfficeShopper, Bright Station's other businesses, is being closed. To reflect this shift, Bright Station will be renamed SmartLogik plc.

A source close to Bright Station revealed, however, that talks with former CEO Dan Wagner concerning the sale of Sparza may be revived following the fundraising, when the future of the core business has been secured.

All of Bright Station's existing directors, except Robert Lomnitz, who headed the group's venture capital arm, will resign from the board on completion of the fundraising. Stephen Hill, CEO of SmartLogik, will take over as CEO of the new listed company.

In a separate announcement, Bright Station reported its results for the quarter to 31 March 2001, showing losses of 6.17m on turnover of 2.13m. Cash at the end of March stood at 7.41m, but had shrank to 2.9m by the end of April.

On news of the placing, shares in Bright Station, which had gained 20% earlier in the day, had fallen by 8.57% by 3.30pm.