Failed merger sees Telecity turn to rights issue

Redbus stops outside internet hotel, but nobody goes in...

Internet 'hotel' company Telecity has announced it plans to raise money through a rights issue after a merger with rival Redbus fell through. Institutional shareholders are backing the heavily discounted issue, which is hoped to raise £17.8m for the ailing web hosting firm. 3i and Shroders will be among the major investors taking up their rights. The merger with fellow internet hotel Redbus fell through due to concerns at Redbus about Telecity's funding. In less than a year Telecity has lost almost 99 per cent of its market value. It is now valued at £23.2m - down from a high of £1.6bn. After an initial rush to back companies hosting corporate IT and web infrastructure, interest in the so-called internet hotel has fallen away. Pan-European internet hotel CityReach went into administration earlier this week after it burned £330m of investment in just two years.