News that venture capital firm Wizard is all but out of IT refresher Micro Focus (MCRO) should be roundly welcomed, its (almost) exit from the share register has been 'pretty much text book,' as one analyst assessed today. With the share price of the COBOL et al software firm off around 2.5% at £15.22, readers may be a little confused, so let's put it all into context.

Spin back 18-months or so and you can read about Micro Focus launching an ambitious $2.35 billion (£1.5 billion) merger with its US peer Attachmate, bringing together various Linux and SUSE legacy systems alongside the UK firm's own COBOL skill set. We liked the deal, it prompted us to pitch the company as a Play of the Week at £10.36, which you can read here.

Programming 6

One of Attachmate's major owners was the US-based venture capital firm Wizard, and it ended up with an approximate-40% stake in Micro Focus following the deal, a stake it never intended to keep. So Wizard and Micro Focus have worked together to gradually cut that stake, launching several accelerated book builds to find buyers of the Wizard stock.

Wizard first sold part of its 86.6 million share stake in July 2015, cutting its holding from 39.9% to 30.7%. A second sale came in late October, cutting its investment to 26.7%, and a third share sale came on 5 February 2016, when it unloaded 28 million shares.

This caused an inevitable temporary share overhang, something we considered would cap share gains for Micro Focus, as we explained here in February this year.


We were wrong, the stock has since rallied nearly 15%. It seems that the market simply cannot resist the cash machine attractions of this investment story, and you can read about that here.

So Wizard's stake is now below the 3% threshold that enforces public disclosure and, to all intents and purposes, ends the overhang issue. What a splendidly executed process, executive chairman Kevin Loosemore (himself a big shareholder, read here) deserves real credit for the sensible way its all been handled, as does Wizard for its patience and not forcing the issue to the detriment of others stake owners.

Issue Date: 13 May 2016