Struggling Teather to raise £2.9m through rights issue

Teather & Greenwood, one of Britain's struggling brokerage houses, yesterday saw its shares slump by one-third after it announced plans to raise almost £3m through a deeply discounted rights issue.

Teather & Greenwood, one of Britain's struggling brokerage houses, yesterday saw its shares slump by one-third after it announced plans to raise almost £3m through a deeply discounted rights issue.

Teather said the rights issue, to be offered at 12p a share to raise £2.9m, was an "opportunistic" move. It said it wanted to take advantage of the fact that a number of other brokerages, such as ING, have recently pulled out of the market of offering research and brokerage services for small companies.

But the reaction in the City was not positive, sending its shares down 28 per cent to 14p.

City sources said the rights issues, which will cost the brokerage £500,000 in fees to Bridgewell, the corporate finance boutique which is fully underwriting it, and other advisers, made Teather's balance sheet appear to be under pressure.

Teather admitted the rights issue was also due to the current tough market conditions.

Jeremy Delmar-Morgan, Teather's chairman, said: "The company, together with the rest of the market, has experienced a difficult past two years."

Mr Delmar-Morgan added: "We have reduced our cost base by approximately £10m on an annualised basis since April 2002."

Teather hopes to strengthen its balance sheet by a total of £5.5m through the rights issue and the disposal announced two weeks ago of a large part of its investment management business.

Teather plunged into the red in the six months to November, making a loss of £2.62m. It cut 51 jobs, or 22 per cent of the workforce. It is not likely to pay a dividend this year.

Teather's executive directors, headed by its chief executive Ken Ford, said last year they would take a pay cut until the company returned to profitability. When it does the directors will be entitled to reclaim the money they have foregone.

Teather may also face claims from clients angry that they were advised by the brokerage to invest in split capital investment trusts. Teather has received 44 complaints, but has not made a provision to cover potential pay-outs because it believes only about two of the 44 cases might have merit.