TalkTalk UK Investors Encouraged to Revolt After £200m Placing

Two influential investment advisers – The Investment Association (IA) and Institutional Shareholder Services (ISS) – have encouraged investors in TalkTalk’s UK broadband ISP business to oppose the re-election of Executive Chairman, Sir Charles Dunstone, after a controversial £200m share placing (19.99% of existing stock).

The placing was made earlier this year as part of an effort to tackle the company’s increasingly large debt pile, which is also under pressure from their joint £1.5bn plan with InfraCapital (M&G Prudential) to deploy a new 1Gbps capable “full fibre” (FTTH/P) broadband network to 3 million UK premises (here).

Strictly speaking TalkTalk’s placing does fall within the city’s rules, although both IA and ISS are angry because it appears to violate the principle of pre-emption rights (i.e. giving existing shareholders the first option to buy any new shares being offered). The EU recently relaxed the rules around such placings and thus the figure of £200m now falls just below the level where the ISP would have first had to seek investor approval.

A spokesperson for the ISP shunned the IA’s related “red-top” warning against the company and said that such “placings are a recognised means of raising capital,” which they noted are supported by the regulations. The matter is likely to come to a head on 17th July 2018, which is the date of TalkTalk’s next annual general meeting. Credits to the Telegraph for spotting.

The news also comes hot on the heels of TalkTalk’s recent joint agreement “not to proceed with the proposed sale” of their direct B2B business customers to The Daisy Group for £175m (here). We should find out soon whether this latest development gives another knock to the provider’s share price as the market opens for Monday trading.