ASX stock of the day: Webcentral (ASX:WCG) shares surge 34%

Webcentral Group Ltd (ASX: WCG) shares are on fire, surging more than 49% at one point today. Here’s why this embattled company is on the move.

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The Webcentral Group Ltd (ASX: WCG) share price is surging today, up 34.92% at the time of writing to 42 cents a share. Webcentral shares closed at 30 cents on Friday afternoon last week, but opened at 32 cents this morning before rocketing as high as 49 cents today, a new 52-week high for the company.

Webcentral shares have had an inversely parabolic year in 2020 so far. The company’s shares were riding high at the start of the year (trading at 38 cents in February), but were hit hard in the March market crash, and slid as low as 6 cents a share soon after. That means that, on current pricing, Webcentral shares are up 600% from these lows.

Even so, Webcentral has been giving investors a tough time in recent years. The company’s shares are down more than 77% over the past 5 years and more than 76% since this time 10 years ago. 

So who is Webcentral? And why are the company’s shares surging today?

Webcentral: an introduction

Webcentral is a company that has been around for a while, albeit under a different name – Melbourne IT Group. It was founded back in 1996 and first listed on the ASX in 1999, but has never quite seen the sky-high share price of ~$14 that the boom was giving out at the time since.

Webcentral describes itself as “Australia’s largest full-service digital services partner for small and medium business.”

According to the company, it supports the growth of over 300,000 Australian businesses. It does so by providing internet domain registration, email and office applications, cloud services, security services and digital marketing. On the former, it was apparently the first Australian company to offer internet domain registry services.

Webcentral has four main brands: Netregistry, WME, Melbourne IT and Domainz. Netregistry is the brand behind Webcentral’s domain, marketing and hosting services. WME specialises in search engine optimisation (SEO), social media marketing, and web design. Melbourne IT offers domains, online security and website design, while Domainz is the company’s New Zealand business, offering similar services that the other three brands provide across the ditch.

Interestingly, Webcentral has recently been the target of a takeover by 5G Networks Ltd (ASX: 5GN), which has a lot to do with the company’s recent share price performance.

Why are Webcentral shares surging today?

The 5G Networks takeover is effectively underway, with 57% of shareholders accepting the offer, according to reporting in the Australian Financial Review (AFR). The offer was reportedly a 1-for-12 all-stock bid, which the AFR alleges could be worth as little as 14 cents a share.

The company said the following on this development: “5GN has long considered the Webcentral Group a valuable enterprise in need of funding and direction.”

Webcentral recently announced to the ASX a capital raising program, partly in order to fund the merger with 5G Networks, which resulted in the shares being suspended from trading.

Following the successful shareholder vote, 5G is reportedly already moved to install its own CEO Joe Demase as a director of Webcentral, alongside the appointment of other executive positions.

Investors are evidently giving a vote of confidence to 5G Network’s plans for the company, which is likely behind the Webcentral share price’s dramatic surge today.

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends 5G NETWORK FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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