PracticeConsultingFSA discusses Redstone inquiry with DTI

FSA discusses Redstone inquiry with DTI

The FSA is liasing with the DTI over its investigation of troubled telecom carrier Redstone, recently rescued by a £25m refinancing package, according to reports.

The Financial Services Authority is investigating allegations of whether Redstone (formerly Redstone Telecom) kept investors properly informed of price sensitive information, according to the Independent newspaper.

The inquiry centres on a Stock Exchange statement released in May regarding the company’s cash position.

In its clarification statement, Redstone said it had £14.7m of cash reserves as of the 30 April, including £3.4m earmarked for acquisitions made during 2000.

The company said the £18.7m ‘free cash’ figure referred to in the earlier statement of the 8 May was the book value of cash as of the 31 March, which again included the £3.4m deferred consideration payment.

Following the clarification, finance director Alan Harrold resigned followed six weeks later by chief executive Graham Cove.

Andrew Walsh, operations and finance director of Fastnet, Redstone’s data subsidiary, was appointed acting group finance director in his place, and is now FD.

He told the Independent that the investigation had been declared in the company prospectus published on 26 June when Redstone was seeking an emergency £25m refinancing package.

Redstone was rescued last month when shareholders voted in favour of a heavily discounted rights issue, which raised £25.3m.

Redstone CEO Ian Brown has said refinancing at the company was now complete.

But the company was criticised after it said an insolvency practitioner from Ernst & Young would be on hand to take control of the company if shareholders voted against the rescue package.

Redstone was once valued at £1.1bn when its stock peaked at 949p. It was last trading at 1.15p.

Links

Redstone in ‘penny stocks’ issue

Redstone loses fourth FD in two months

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