In response to online speculation, specialist medical diagnostics company Omega Diagnostics (ODX:AIM) has confirmed it is in discussions with certain shareholders and investors regarding a possible capital raise.
The company said ‘challenging’ market conditions meant any raise would need to be conducted at a discount, sending the shares 25% lower to 8p.
Today’s news follows the resignation of chief executive Colin King on 19 January after nearly seven years with the company, who was immediately replaced by managing director of the Health and Nutrition division, Jag Grewal.
In the update, Omega confirmed it had £2.5 million of cash and an undrawn overdraft facility of £2 million, arguing ‘thus there is no short term need to raise additional capital’.
CONTRACT DISPUTE
Speculation has been building since 10 December when Omega revealed the Department of Health and Social Care had asked the company to pay back £2.5 million of pre-production payments it received in relation to a contract to supply manufacturing capacity for lateral flow antigen tests.
Omega today re-iterated it has ‘significant’ cash reserves and therefore there was no need to raise additional capital and it may choose not to proceed with a fund raising ‘until such time as conditions are more favourable’.
Investors have clearly taken the view that Omega needs to raise equity to plug the potential liability caused by the contract dispute, despite the board previously saying they didn’t believe the company would be required to repay the funds.
