New World Oil warns investors after confusion rains on placing parade

Confusion reigned at UK oil explorer New World Oil & Gas after its attempts to raise funds met with more resistance than expected.

On Tuesday, the company issued a "cautionary statement" to try and clarify several issues around the fundraising it announced last Wednesday, including the possibility that an individual shareholder, Judith Mary Williams, might perhaps be referred to the regulators after accidentally triggering a mandatory bid for the company.

The AIM-listed company revealed last week that it planned to raise £1.5m with the placing of 2.7bn shares at a price of 0.055p apiece, with the help of broker Cornhill Capital.

The price of its existing €0.7bn shares fell by around a third on the day of the announcement in frenzied trading but the fundraising, which was subject to an extraordinary shareholder meeting, reportedly faced an unexpected objection.

The Financial Times' Alphaville blog reported that a group of independent shareholders, who at 16:30 on Friday held a combined 18.6% of New World's shares, "indicated they intend to block the capital raising".

If this blocking move is successful, it would create a short-squeeze for those traders that have dabbled in 'naked' short-selling of New World shares, namely selling stock in the expectation of satisfying the sale with new shares that would be issued in the placing.

New World, in its statement on Tuesday, also said that it had noted internet commentary concerning "the high volume of trading in the company's shares last week and speculating as to the intentions of various alleged shareholders".

"Anyone wishing to deal in the company's shares is warned to exercise extreme caution in relation to any views or supposed information offered by these sites."

It added that, due to the high level of investor interest, it was now considering "various courses of action" in relation to "ensure that the wider interests of shareholders are considered".

Alphaville noted that on Aim, a common service offered by brokers is extended settlement, where a transaction will settle in a number of trading days.

A group set up by shareholders, including financial writer Ben Turney, "to give shareholders of New World Oil & Gas a much needed voice", said events since the placing announcement were "extremely troubling".

The group described the price offered in the placing as "harshly discounted" and added: "Having suffered through the near total value destruction inflicted upon our holdings, the 45% discount announced on Wednesday was the final insult our board of directors appears determined to inflict upon us."