Shares in Western Australian ISP iiNet Ltd were down almost 50 per cent at market close after the company resumed trading today.
Shares in Western Australian ISP iiNet Ltd were down almost 50 per cent at market close after the company resumed trading today.
On Friday, iiNet released a revised earnings outlook and also announced Sydney-based telco PowerTel was to take a 14.9 per cent in the company.
At market close, shares in iiNet were down 84 cents to 85 cents, the price agreed for each of the 16.4 million shares in PowerTel's stake.
The price represents a 50 per cent discount to the $1.69 per share price that iiNet last hit before a trading halt in its shares was called about five weeks ago.
The price is a huge drop from iiNet's $3.40 per share peak in mid September last year and produces a market capitalisation of around $100 million.
However, iiNet sees upside from the deal by marrying its existing broadband infrastructure, established for a retail customer base, with PowerTel's wholesale client network of smaller ISPs.
iiNet's revised EBITDA guidance of $24.6 million for the full year, before abnormal items, is down from its previous guidance of $40.1 million with the company expecting to report a net loss for the year after amortisation and depreciation. The company forecast revenues for the period to be approximately $250 million.
The company said that based on recent trading and the budgeted result for the next three months, iiNet was currently operating at a normalised run rate of $25 million EBITDA per annum.
iiNet executive chairman Peter Harley said that the issues with iiNet's financial position had not been identified early enough.
"iiNet has been through a period of rapid growth in the last few years, including the acquisitions of iHug in New Zealand and OzEmail in Australia, resulting in iiNet now being the third largest internet service provider in Australia and New Zealand," said Mr Harley.
"In every other six month period since 2001, there has been either a large acquisition or a major integration. This is the first clear period without such activity and it is now obvious that, with the rapid expansion of the business, our processes did not keep pace.
"Following the discovery of the gap between the actual and forecast position, we chose to adopt a conservative approach, resulting in a longer than expected period of suspension from trading. However, this has allowed iiNet to fully review its systems, its financial results and forecasts to ensure that there is no repeat of this situation."