The future looks bleak for offshore software and services provider Intelligroup Inc after it sold off half the company without shareholder approval in a desperate attempt to avoid bankruptcy.
Intelligroup shares on Nasdaq fell 30% to $1.15 after the Edison, New Jersey-based company announced that over the weekend it had sold 50.3% of its shares to SB Asia Infrastructure Fund LP, an affiliate of Softbank Corp, and Venture Tech Solutions for $15m.
Now the company could be de-listed from Nasdaq for ignoring guidelines that require shareholder approval for sales of more than 20% of shares.
The transaction was necessary as Intelligroup’s cash position and relative cash availability under its $15m revolving credit facility had become inadequate to fund ongoing operations, the company said in a statement. Delaying the transaction in order to seek shareholder approval would jeopardize its [the company’s] financial viability, the company said.
Intelligroup is currently restating all its financial statements since January 2001, a process that has already identified a revenue reduction of $800,000 and net profit of $900,000 for the year ended December 31, 2003. Additionally, Intelligroup has identified adjustments of $1.2m relating to inter-company transactions prior to 2001. The company has yet to finish its investigations, but more restatements are expected.
Neither Intelligroup nor Nasdaq had returned comment by the time of going to press. Nevertheless, even if Nasdaq takes no action, Intelligroup will not be able to regain either investor or client confidence.
Either Intelligroup is aiming to go private, or SB Asia is already looking to sell up its stake in preparation for bankruptcy. Intelligroup’s market capitalization currently stands at around $20m, valuing SB’s share at $10m, a $5m fall in less than a day of trading.