Millions were wiped off the share value of Scottish online dating group Cupid yesterday after it revealed the £3 million sale of its remaining websites.
Stock in the AIM-listed firm plunged more than 30% in early trading as investors reacted to the proposed divestment and a move to reclassify the business as an investment company.
The twin moves follow a strategic review of the Edinburgh-headquartered group’s operations that was announced in September with the stated intention of “maximising shareholder value and arresting the company’s cash burn.”
The proposed sale involves the company’s “traditional” online dating assets including the Cupid, UniformDating and LoveBeginsAt websites and will leave it with “no material” remaining trade options.
The portfolio is being sold to the British Virgin Islands registered Tradax IP Licensing; Malta incorporated Together Networks Ltd; and Together Networks Holdings Ltd, which is incorporated in the British Virgin Islands.
Cupid, which is set to change its name to Castle Street Investments, also said it had reached agreement with Grendall over the sale of its “casual” assets.
The two firms the second of which has links to Cupid co-founder Max Polyakov had originally agreed a £43.1m sale of the casual dating portfolio with a balance remaining to be paid of £20m.
The parties have now agreed to reduce that outstanding figure to £12.5m, which is to be fully paid a year ahead of schedule in December 2015, with a £1m downpayment due next week.
Cupid yesterday said the online dating landscape continued to change rapidly and it had been forced to review its position to cut trading losses.
The business has set aside £1.7m to cover closure costs relating to its operations in the UK, USA, France and Ukraine, and post-sale will have just seven staff based in Britain.
“Through the course of the first half of 2014 it became clear that the pace of change in the industry was increasing; innovation with mobile and intuitive apps is accelerating as they gather momentum and scale,” Cupid told investors yesterday.
“In light of this and in recognition that as a result the business would not break even when expected, the board initiated a review of strategic options available to the company to maximise value for shareholders and arrest the cash burn.
“All options available to the company were considered, including further cost reductions and the disposal of certain subsidiaries or assets to aid streamlining.
“On the conclusion of this review, the directors believe that the best course for shareholders is to seek a buyer for the traditional dating assets.”
Company chairman George Elliott said the changes would provide greater certainty over the group’s cash balances and remove costs within the group.
“The company will effectively become a well capitalised cash shell with approximately £18m that can be utilised for new opportunities in line with our proposed investing policy or returned to shareholders,” Mr Elliott said.
Shares in Cupid closed down 25.49% or 6.50p at 19p after yesterday’s trading session.