Shares in troubled Ionica are suspended

SHARES IN Ionica, the troubled telecoms operator, were suspended yesterday as the company prepared to make an announcement about its future.

Trading was suspended at 17p after they rose 3p early in the morning. This follows a 5p jump on Friday after the market responded positively to a statement by Tony Coleman, Ionica chairman, that the group was confident of announcing a financial rescue by year-end.

It is understood that advisers to Ionica were concerned that a false market was developing in the shares. A further announcement is expected within the next few days.

The company has been in talks with a potential strategic investor since September. It has also extracted an agreement from its bankers to consider exchanging some of the company's pounds 300m of bonds into equities. However, this is likely to mean massive dilution for existing shareholders.

Ionica floated at 390p last July, valuing the company at pounds 659m, but crashed after it ran into delays with telecoms software and lost large numbers of customers. Yesterday's close valued Ionica at just pounds 29m.

Ionica has enough cash to trade until January. However, City observers believe any deal will have to be struck soon. "Either an investor comes in, or it goes bust," one analyst said.

The identity of the strategic investor remains a mystery. Warburg Dillon Read, Ionica's advisers, are believed to have offered the company to most of the sector's large players but none are thought to be keen.

Last week, unknown investors tried to ramp Ionica's share price by sending out a press release claiming that Vodafone had agreed a financial rescue. This was exposed as a hoax after the release misspelt Vodafone's name.