Eidos cash call hits share price

Eidos is hoping for big things from Microsoft's X-box

Shares in British computer games maker Eidos dropped more than 6% after the company confirmed it will ask investors for extra cash to fund an attack on new markets.

Eidos said in a statement it was in the final stages of arranging a rights issue, under which shareholder would be invited to buy new shares "at a deep discount" to the company's closing share price on Friday of 297 pence.

The company, creator of games such as Tomb Raider and Who Wants to be a Millionaire, said it was raising money to position itself for anticipated growth in the computer games market.

At Friday's closing price the company had a market value of about £308m.

Shares in Eidos were 6%, or 17.5 pence, lower at 279.5p by 1500 GMT on Tuesday.

Profit warnings

A source close to the deal said current market conditions justified a deep discount.

"From a strategic point of view, a lot of video games companies across the United States and Europe have suffered from profit warnings and bad results," the source said.

"As video games companies are not flavour of the month, you can't go for too high a price."

Under the rights issue, Eidos will offer its shareholders the chance to buy new shares at a discounted rate.

The new shares could be offered at a discount of up to 50% from Friday's closing price, analysts said.

Analysts said the issue could raise more than £50m, but Eidos is refusing to say how much cash it hopes to raise.

The cash would fund Eidos's campaign to develop games for two next generation consoles, Microsoft's X-box and Nintendo's Gamecube.

Investors warned

In its last results statement, covering April to December 2000, Eidos revealed that it had been hit by delays in the roll-out of new games console systems.

"The company remains cautious about trading over the next nine to 12 months," chairman Ian Livingstone said.

"There continues to be a lack of visibility through to Christmas 2001."

Pre-tax losses over the nine months widened to £68m, including an exceptional charge of £55m, from £12.6m in the same period in 1999.

Sector hopes

But Eidos shares, which have proved among the most volatile listed on London's stock exchange is recent months, have recovered from less than 170p in early April to more than 320p last week over hopes for the computer games market.

Prospects for the industry were improved earlier this month when Sony said it had solved distribution problems which have hit the number of its PlayStation 2 consoles reaching shops.