As presaged a week ago (see here), IT recruitment firm-cum-digital media star Parity is to raise £7m gross in a share placing to finance future digital media acquisitions. Management also confirmed the move of its Main Market listing to AIM. Parity made its first acquisition almost exactly a year ago, buying Shoreditch-based, self-styled “pioneering creative 3D technology company”, Inition, for £3.75m (see Parity buys into its digital dream).
This will be the third fund raising exercise that top team Philip Swinstead and Paul Davies have undertaken since taking back the reins in June 2010, and brings the total raised so far to around £15m. The latest placing will be at 27p, a 23% discount to the prior close, and will dilute existing shareholders' stakes by nearly 26%. Parity's shares closed 3% down at 31p after the news, valuing the stock at £23m.
Is this all a cause for celebration? After all, when Swinstead and Davies took back control, Parity's shares were trading at around 8p. At the end of that year the shares started a rapid climb to hit 33p in April 2011, but then went into graceful decline for nearly two years, ending 2012 at 19p. Then started a miraculous recovery which saw Parity's shares surge to 45p in early May, only to be deflated again by news of the latest placing and move to AIM.
You can argue the case that what management is aiming to do is create shareholder value and that is surely a 'good thing'. But where they are looking to do this is not with Parity's core recruitment business, but by funding and incubating an unrelated venture which will likely take on a life of its own should it become successful. Does it matter? If investors can get their money back and more, maybe not. But it rather begs the question as to where Parity might be if management had applied its energies and fundraising abilities to the core recruitment business.
