Penna Consulting is to raise £4m by selling new shares to fund working capital requirements and the growth of its recruitment communications and interim management businesses.

The move boosts the number of Penna shares by 22.6%.

The shares fell heavily after the announcement, and are now trading at about half their value of six months ago.

Penna had about £5m of debt on its balance sheet. It has a new loan facility with the Royal Bank of Scotland to refinance some of this, but finance director David Firth told Recruiter that about £1.7m of the money being raised was for "working capital", with the remainder funding expansion. There would be "uncertainty around the company's ability to continue as a going concern if shareholders do not support the placing," said the firm.

Chairman Stephen Rowlinson, who had already made a loan of £1.2m to Penna, is to increase this by £724,873. The total Rowlinson debt of £1.9m will convert to shares. This will take his stake in the company up to 34%. Any party taking its stake over 30% is normally required to make a bid for the entire company. However, at an extraordinary general meeting on September 11, shareholders will be asked to waive this requirement.

Meantime, the company is quitting the main London stock market and will be traded on the Alternative Investment Market. Rowlinson said this would reduce corporate costs.

In July, the company warned on profits due to problems with Career Transition, the sector which helps staff who have been made redundant. This division accounted for £19.3m of the group's turnover of £44.6m in the year to March.

Penna closed 11 offices in the year to March following restructuring.