Inspired Gaming Group, the server-based gaming specialist, has fallen to a historic stock-exchange low on plans to raise £40 million by way of a discounted share placing.
The placing's proceeds, the company said in its interim results Monday, will be used pay £20 million in cash costs associated with its exit from the pubs sector, as well as to repay debt and fund growth.
Shares, which trade on the London Stock Exchange, fell 8.25 pence, or 16.75 percent, to 41 pence -- 9 pence below the placing price; the company's £92 million in net debt, moreover, exceeds its market capitalization, £29.9 million, three times over.
After issuing a profit warning in March 2008, Inspired on Monday offloaded its loss-making pubs division to Danoptra Gaming Group, a land-based operator in London specializing in machine-based gambling, for "a nominal consideration."
Financial details were not disclosed, and the pubs division is thought to have suffered beneath the weight of the United Kingdom's smoking bans, enacted in 2006 and 2007.
The decision is sure to be welcomed by City analysts, some of whom believe the company, stripped of its pubs division, remains an attractive investment target.
"The underlying business, ex-Pubs, we believe, is a high-quality operation with excellent growth prospects and shorn of the underperforming Pubs Division it should be capable of commanding a higher multiple in the market," Wyn Ellis and Richard Carter, analysts with Numis Securities in London, wrote in a March 2008 research note.
Server-based gaming, which remains the company's strong suit, generated £18.6 million in turnover, up from £17.5 million during the year-ago period.
For the 28 weeks ended April 12, 2008, Inspired maintained 13,522 server-based gaming machines, up 21 percent against the same period last year.
IGN's Take
Inspired provides server-based gaming to Ladbrokes and William Hill -- fixed odds betting terminals, specifically, which are strong revenue generators for both companies.
With a diminished market cap -- but with a significant amount of debt -- Inspired could be an attractive target for Playtech Ltd., which raised £112 million just two weeks ago to fund acquisitions.
Inspired, with its list of clients, would give Playtech a strong position in the server-based industry, which it targets currently with Videobet, its subsidiary in Estonia.
Should Playtech acquire Inspired, the potential upside could be strong, and would give the company another possible jumping-off point into the land-based Asian market.
Chris Krafcik is the editor of IGamingNews. He lives in St. Louis, Mo.