Falling Knife of the Week: Equation Corporation Limited

Equation Corporation (SGX: 532) is this week’s Falling Knife. Shares of the company tumbled by 23% since last Friday to close at S$0.01 on Thursday.

Equation Corporation is an investment holding company with business offerings such as electronic waste recycling services, energy auditing management and professional engineering consultancy services, sales and distribution of audio, video and other consumer electronics products, etc.

On 24 March 2014, the firm announced that SAC Capital Private Limited will be underwriting a rights issue that will take place as announced on 19 Feb 2014. An underwriter guarantees that the funds required by the company will be raised. SAC Capital has to subscribe for any shares offered but not taken up by shareholders.

Regarding the 19 Feb announcement, it was made public that Equation Corporation will be undertaking a renounceable, partially underwritten rights issue of around 1.169 billion new ordinary shares in the capital of the company. The issue price will be S$0.007 for each rights share, on the basis of one rights share for every four existing shares held by entitled shareholders.

The rationale for the rights issue is to “finance future business ventures relating to the [company’s] ordinary course of business through acquisitions and/or strategic joint ventures when such opportunities arise and for the [comnpany’s] general working capital”.

The firm is currently trading at a historical price-to-book ratio of 1.6.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.