Americans move on Rhino

THE INVESTMENT COLUMN
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The Independent Online
Hindsight is a wonderful thing in investment but Rhino, the computer and video games retailer, was never going to be anything but a pretty volatile stock. Launched in September 1992 on the back of a surge of interest in screen-based games, the company's shares rocketed over the following 15 months. Maintaining that rise, however, was always dependent on the fad continuing. It didn't.

Since Christmas 1993 it has been downhill all the way, with the shares tumbling from a peak of 65p to just 11p yesterday, 3p above the price at which the 25 per cent shareholder Electronics Boutique Inc (EBI), an American company in the same business, is underwriting a rescue rights issue. The cash-call, on the basis of five new shares for six existing units, will raise about pounds 9m.

EBI is planning to use Rhino as a launching pad for its planned European expansion and after the rights issue could end up with more than 50 per cent of the shares. It has received special dispensation from the takeover panel not to have to bid for the company if its stake increases over 29.9 per cent. The rights issue, the second this year, paves the way for a new strategy which will include rebranding Rhino's Future Zone shops as Electronics Boutiques by Christmas, guaranteeing lower prices than any competitor and using EBI's systems to judge consumer trends better.

The fundamentals look no more attractive than they did and the shares are best left to EBI.

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