Gijima’s share price plunged by 36% on Monday, reaching a new record low of 9c/share, as investors fret about the struggling technology services company’s ability to survive.

The share has come under considerable pressure in recent weeks as it gears up for a second rights offer in as many years. A rights offer is a way of raising money from shareholders that involves giving them the right to buy new shares at a discount to the current market price. Gijima wants to raise R100m through its latest rights offer.

The offer is fully underwritten by Gijima chairman Robert Gumede’s Guma Group of companies. This means that if other shareholders don’t exercise their rights, Guma will underwrite the full R100m — and take a larger stake in the business in the process. The planned offer has put further pressure on Gijima’s shares, which have already fallen by more than 99% since 2010.

But uncertainty about the company’s ability to survive is also putting pressure on the share price, says independent analyst Irnest Kaplan of Kaplan Equity Analysts.

At the end of September, Gijima warned that it had failed to comply with financial covenants related to borrowings of R213m. Its auditors, KPMG, warned of the “existence of a material uncertainty which may cast significant doubt on the company and subsidiaries’ abilities to continue as going concerns”.

The company said at the time that it has entered into a new agreement with financiers in terms of which the repayment terms of the loans has been extended.

“The company can confirm that it will be able to pay its obligations when they become due and comply with securitisation of financial covenants based on budgeted and forecasted cash flows in future,” it said.

However, if Gijima’s share price continues to trade below 10c, it would mean shareholders are trying to get rid of their shares, Kaplan says. “It would mean that despite the rights offer, they think the share is not worth that.”

Anything could happen to the company, he says. “It will be a lot more challenging [to turn it around] than the guys at Gijima think.”

But the fact that Gumede is willing to underwrite the rights offer fully is positive, Kaplan believes. “I admire his persistence. I’ll never underestimate his tenacity and his unwavering confidence.”

Gijima reported a full-year loss for the year to 30 June 2014 of R152,4m, from a loss in 2013 of R210,8m. The headline loss was 77c/share, an improvement from the year-ago figure of R5,16/share. Revenues slumped by R330m to R1,5bn in the same period.

“The results were slightly better than before, but they’re still not good,” Kaplan says. However, the potential for a turnaround is there. “They do still have a good few thousand people, they have some very good parts to the business and they have renewed most of their big, long-term contracts.”

Could Gijima become the target of a takeover — hostile or otherwise — given that its market capitalisation has fallen to just R20m?

Kaplan doesn’t think that’s likely given that Gumede’s Guma already holds about 45% of the equity and could easily end up holding a majority of the shares after the rights offer.

Gumede would not accept an offer of just R20m for the business given that he’s invested “orders of magnitude” more than that of his own money in trying to turn it around, he says.

What’s more likely, Kaplan says, it that Gijima will be delisted at some point. “When a company gets into a situation like this, its share price typically takes a long time to recover. It almost gets punished for longer than it should be, even once its recovery is underway.”