Investors approved a rescue deal to save Patisserie Valerie today but were left frustrated over unanswered questions as chairman Luke Johnson warned that the company could face administration within a week if the proposals were voted down.
The cake shop was just three hours away from collapse before a rescue deal was arranged last month, Johnson revealed, as shareholders gathered for a crunch meeting to vote on proposals to save the company.
The baker, which announced a shock £40m hole in its finances last month, saw shares suspended as the police launched an investigation into potential fraudulent activity.
The deal proposes to raise £15m through the issue of 30m ordinary shares, most of which will be used to repay a £10m bridging loan from Johnson, which was injected to give the firm immediate liquidity.
Johnson has also provided a separate three-year £10m loan to the company.
Shareholders were frustrated at being left in the dark over the future of the company, as Johnson refused to disclose any information about the accounting irregularity to avoid hindering a Serious Fraud Office (SFO) investigation.
“It’s pretty poor that they couldn’t offer up a little bit more information," Chris Boxall, co-founder of Fundamental Asset Management, told City A.M.
"There was no other option, it was this or wave goodbye to the business.
“It is clearly not the business we were all led to believe it was, with the kind of returns we were led to believe. [We want to know] what does the future hold? Who is going to manage this going forward?
“[The non-executive directors] have clearly been found asleep at the wheel. I don’t know what they have been doing."
Investors also voiced concerns today over the potential dilution of shares, as Johnson warned that the company could be within a week of entering administration if the rescue proposals had been rejected.
During a heated exchange investor Angus Forbes urged the board to reconsider the proposals.
“If we get fresh shareholders coming in now, frankly I want the company to go to hell. This should be an action of solidarity not one with new shareholders,” he said.
“If we don’t pass the resolution and get the money in today, the company is at risk of going into administration this week,” Johnson said.
CMC Markets chief analyst Michael Hewson commented: "The shareholders are saying ‘why did you hold a gun to our heads’ but what is the alternative when faced with shares being diluted or losing your stake completely.”
“There’s an awful lot of unanswered questions, but he [Johnson] is putting his money where his mouth is. He is in a difficult situation and he is trying to put it right, he now needs to make sure that the governance of the business is beyond reproach.”
Former chief financial officer Chris Marsh, who was arrested and released on bail last month, resigned last week following his suspension.
Two London branches were shuttered as the news of the accounting irregularities broke, however Johnson confirmed that one had since reopened and current trading has been unaffected by the scandal.