Redstone in crisis share sale

Redstone: Racing to secure its future

Redstone Telecom is to launch a cut-price share sale in a last-ditch attempt to escape bankruptcy.

The corporate telecoms provider said it aimed to raise £22m ($31m) by issuing new shares at one penny each - a 99.9% discount to the stock's peak reached in February last year at the height of the tech boom.

It said the alternative to a successful share issue was to go bust.

Analysts said it was uncertain whether investors would react positively.

"It's difficult to see why investors would want to stump up the cash," said one.

Extra financing

Redstone said it would give details of its fundraising plan as well as issue results for the year ended 31 March "in the next few days".

It had previously said it would report this week.

In a trading update last month, Redstone said it stood by an earlier target for its existing business to reach profitability in the current business year.

But investors were unimpressed by news that extra financing would be required before the company could introduce planned high-speed internet lines.

Redstone was also forced to clarify its financial position two days after the statement - prompting the resignation of finance director Alan Harrold.

The shares slumped again.

BT delays

On Friday morning, Redstone shares stood at 3.25p, down 2.5p or 43% on the day, valuing the company at £3.8m.

They hit a high of 949.5p in February last year, giving Redstone a market value of £1.1bn.

Months earlier Redstone had floated at less than 200p a share.

Several other telecoms firms have also been hit by problems after planning to offer high-speed internet access.

Telewest, NTL and WorldCom are among those that abandoned plans to introduce the services.

Providers have complained about issues including bureaucracy and delays in the opening up of British Telecom's local exchanges.