A Bristol data and technology company has fallen into administration months after being acquired for £1.28m in a reverse takeover deal. South West-based 3radical – the main subsidiary of digital marketing firm Electric Guitar Plc – has instructed Paul Ellison and Christopher Errington of KRE Corporate Recovery to market its business and assets for sale.
It is understood that KRE will be appointed administrators with a view to completing a pre-packaged sale of 3radical. The decision was made with the agreement of Electric Guitar’s board after the firm struggled to raise equity funding.
The news comes just two days after Electric Guitar suspended its trading of shares on AIM as it seeks to clarify its financial position.
Electric Guitar has been working on a so-called buy and build strategy since acquiring 3radical seven months ago. It completed the all-share acquisition of data business Mymyne in August, which it said resulted in “significant synergies and cost-savings” for 3radical.
But the company’s share price has continued to decline since the reverse take over despite Electric Guitar investing £250,000 in sales and marketing.
Electric Guitar said in a statement: “It has taken longer than expected to benefit from the fruits of such activity although this is now starting to show. Therefore, the Board has been actively seeking additional capital beyond its existing resources to be able to proceed with its buy and build mission, beyond just bringing the 3radical business to profit.
“However, the company’s declining share price has not only inhibited its ability to pursue its buy and build mission, but has also made an equity fundraising difficult at this time.”
Electric Guitar had been courting prospective investors in Singapore, where it has a presence, and had secured “in principle” substantial new funds, it said. But it is understood the investors pulled out “unexpectedly” claiming the market was “insufficiently liquid”.
“This combination of factors led the Electric Guitar board to conclude that, absent substantial additional funding in the short term that was not now available, 3radical’s business could not reasonably be expected to be able to pay its historic and ongoing liabilities as they fall due, despite 3radical’s management’s positive longer term outlook for the business,” the company added.