Praemium founder and chief executive Arthur Naoumidis is unable to subscribe to the company's rights issue due to insufficient funds.
The provider of online portfolio administration and separately managed account (SMA) technology yesterday completed an institutional placement to raise $3.675 million and is seeking to raise another $2.775 million through a 1-for-10 rights issue to existing shareholders.
Praemium said in a statement that although Naoumidis "does not have sufficient funds available to apply for his entitlements", it is the present intention of each of Praemium's directors to subscribe for their entitlements in full under the rights issue.
"I'm unable to subscribe to the issue because as founder of Praemium, I did not have the opportunity to put aside the money required for me to take up my rights," Naoumidis told InvestorDaily.
"In the investment markets it's pretty much accepted that when you're undertaking a rights issue, all the directors must put up their hands and say 'I'll take up my share because it clearly it must be a good investment opportunity otherwise why wouldn't I do it?'
"My circumstances are that I founded Praemium in 2001, mortgaged my house and for the first five years I didn't earn much of a salary, so quite frankly, I don't have the money.
"I have the money to live and everything else but given I'm such a large shareholder of Praemium I would have had to put up $400,000 - which I don't have lying around."
Praemium's cash reserves will be over $6.5 million following receipt of the placement proceeds and around $9 million upon successful completion of the rights issue.
The money will be used to fund the company's organic growth strategy and in particular boost Praemium's market share in the UK, Naoumidis said.
"We see big upside in the British market because we aim to be a mainstream platform provider in the UK, whereas in Australia we're still a niche provider but still have a substantial $34 billion under administration," he said.
"We expect that in three or four years' time, Praemium will earn more of its revenue in the UK than Australia simply because of the fact that the UK market is three times the size in terms of assets.
"And we believe that our timing of entry into the UK will allow us to become a mainstream platform provider in that area, whereas Australia is a much more mature market and has a lot more competitors."
