Crisis-hit Redstone lurches lower

Shares in Redstone Telecom plunged again after the crisis-hit corporate telecoms provider unveiled galloping losses and the departure of its chief executive.

The company also gave details of a cut-price share sale it plans in a last-ditch attempt to escape bankruptcy.

Redstone said it would issue 2.65 billion shares at one penny each in order to raise up to £25.3m, net of expenses, which it needed for day-to-day expenses.

The new shares are priced at a 99.9% discount to the stock's peak reached in February last year at the height of the tech boom.

Dim view

Redstone has said the alternative to a successful share issue is to go bust.

Analysts said many investors appeared to have taken a dim view of the plans.

The shares dropped 43% on Friday and a further 47% on Tuesday morning to reach 2.25p, valuing the company at less than £2m.

They hit a high of 949.5p in February last year, giving Redstone a market value of £1.1bn and ambitions of becoming a major force in UK telecoms.

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

Standing by profitability target

Redstone said chief executive Graham Cove, who had led the company since its formation in 1995, resigned on Tuesday following differences over the company's future direction.

He was replaced by chief operating officer Ian Brown.

At the same time, the company reported pre-tax losses of £101.8m for the year ended 31 March - about 10 times the loss made in 1999-2000.

Redstone said it stood by an earlier target for its existing business to reach profitability in the current business year.

But investors have been unimpressed by news last month that extra financing would be required before the company could introduce planned high-speed internet lines and marked down the shares.

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

Andrew Walsh, a director, was on Tuesday named as Mr Harrold's replacement.

Others hit

Redstone said Mr Brown, Mr Walsh and US-based Stephens Group, its biggest investor, would together take 502.2 million of the new shares, representing about 19% of the offer.

Existing shareholders are being offered seven new shares for every two they own.

Several other telecoms firms have also been hit by problems after planning to offer high-speed internet access, although none has suffered such a sharp reversal of fortunes as Redstone.

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.

Little Rock, Arkansas-based Stephens Group is perhaps best known to UK investors for rescuing the beleaguered animal research firm Huntingdon Life Sciences.