GSE offering seeks to raise $5.6 million

Columbia company offers shareholders more stock at set price

European venture lost money

September 19, 2001|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

GSE Systems Inc. of Columbia announced yesterday an offering for shareholders to buy additional shares at a fixed price as the company tries to raise $5.6 million in equity capital after losing money in a European venture this year.

GSE, which makes simulation software for power plants and process control systems for manufacturers, said it will use the money to repay a loan from one of its major investors and for working capital, acquisitions, expenditures and general corporate purposes.

The offering will become effective Oct. 31.

Shareholders will be issued 0.711 subscription rights for each share they own. For example, a shareholder who owns 1,000 shares will have the opportunity to buy 711 more shares.

The company's board of directors remained neutral on the offering.

GSE's cash position worsened in the first six months this year because of its involvement in starting Avantium International B.V., a Dutch company, said Gill Grady, GSE's senior vice president of business development. The new company automates research and development processes for the pharmaceutical and chemical industries, he said.

GSE sold some technology and assets to Avantium in March in exchange for increasing its stake in the company to 19 percent, the SEC filing states.

As of June 30, GSE's cash and cash equivalents totaled $607,000, down from $2.5 million for the corresponding period last year, according to the registration statement filed Friday with the Securities and Exchange Commission.

The company borrowed $1 million from ManTech International Corp., its second-largest shareholder, to help sustain it through this summer, Grady said. Proceeds from the offering will be used to repay that loan, but GSE still owes ManTech $3.9 million in subordinated debt, he said.

Grady said he thinks the company is poised for growth in part because of renewed interest in the U.S. energy industry.

The offering's fixed price per share is $2.53, which was set by taking the average share price of a 30-day period from May to June and adding 10 percent, Grady said.

Shares of GSE, listed on the American Stock Exchange, last traded at $1.65 a share.

Grady said that because the stock is thinly traded, small and large shareholders have a big influence on share price on the open market.

The additional offering will dilute shares, but shareholders can protect their positions by buying more shares, he said.

"The major ones who have significant shares in the company, this will be a deal for them," Grady said.

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