Evocutis Plc (AIM: EVO and ISDX:EVO), the London listed investing company, today announces that David Lenigas has retired as Chairman of the Company with immediate effect and that Hamish Harris has been appointed to replace him as Chairman.
The HH stocks are essentially a pure sentiment play at the moment. Proving that there are (or are not) hundreds of billions of barrels of oil at HH is a long way in the future - certainly more that extrapolation from the well drilled so far.
Ukog etc may spike again in the meantime. However, those playing the HH sentiment seem to stick with UKOG etc. they don't view EVo as a HH trade, as so at best you get a small blip here when UKOG etc go ape. I know, I was watching here the last time HH went bonkers.
It could change - but you'd need some Twitter ramping crew to push EVo as the pure leveraged HH play for that to happen. And there's been no evidence that mob have any desire to do that. In the meantime you can do basic arithmetic as to the cash burn versus cash on the books, and put the date in your diary as to when the next heavily discounted placing will happen. Unless the SP gets ramped so as to increase the Mcap, that placing will be very very dilutive just because of the sums needed relative to the current Mcap. If you do want HH, surely do UKOG or the like?
Once flow testing starts and if they find its commercial then I'm sure there is plenty of upside from here ...if the value of the small stake was valued on a pro rata basis like UKOG even today the price here would be multiples ..2% of X billion barrels is worth more that 150k gbp ...
I was disappointed that there was zero mention of Venn royalties in the results. That was one of the appeals of EVO - the royalties would have helped to offset the plc costs for such a small investment company. No idea where they have gone to.
EVO moved to a certain extent during the last HH rise, but not anything like as much as the more visible pure-oil HH plays. Pity.
If you look at most DL stocks (or ex stocks) there has been a very marked decline over the last 3 months, all together. Even REM, which has had incredibly solid 0.8p support since seemingly forever, has now broken thru that barrier and continues to slide down (currently in the mid 0.6ps). Look at the 3 month REM chart - horrific. And that's me as a long time REM holder speaking remember.
This set of slides all started coincident with appalling PR coverage of the LGC IPO, specifically some eye-watering corporate greed where the musketeers awarded themselves about 30% of the company at 0.01p per share just a few days before raising "initial seed capital" from new shareholders at 2p. And without telling them that it wasn't either initial seed nor the size and cost of the wad they'd awarded themselves up front. This was them showing greed and hubris that turned the stomach of even the most DL-tolerant investor such as myself; they thought they could walk on water but have stepped over one line too far in my opinion. And are now reaping the consequences of that.
As a result people have been voting with their feet and the "DL premium" we've been used to (e.g. that REM trades at a premium to the sum of its part, mainly BCN) is now evaporating.
Here at EVO there's been almost no attempt to do any PR by DL (e.g. on twitter), very little volume, and its quickly become an illiquid stock with no interest and a rapidly slipping SP.
"I think the sooner we can get the 3 muskateers voted off the board and replaced by someone a little more fair with the fees they earn then all the better. "
- agreed but zero chance of that. Who's going to boot them off and take over the shell? No precedent for this for a DL company (as much as I would wish that).
"The current investments do not need much more than a little admin, with cash burn reduced significantly the listing begins to have value and the investments may well begin to hold value early next year as HH plans develop."
- this is an AIM investing company and as such it incurs much higher fixed costs than a standard listing shell (e.g. FBDU, which has got annual costs down to around £70k). There are NOMAD and listing fees and stuff, all of which rack up the costs. Even if the 3 musketeers decided to work pro bono (oh look, is that a pig trying to land at Monaco airport?!?!) then you'd still be looking at > £150kpa plc costs. There's no way the EVO costs for BoD and plc costs will be less than £250k for 2016, even with a fair wind.
That wouldn't have been an issue if the mcap was higher - a £250k fundraising on a £2.5m mcap company is ~ 10% dilution and arguably tolerable. The issue for EVO now (as opposed to 6 months ago) is that the recent SP slide has meant that the cost of capital is now much higher - i.e. they will have to issue many, many more shares to raise £250k.
Let's do some maths. 725m EVO shares. Using my pessimistic 0.05p placing price as an example and the need to raise £250k to pay the bills absolute minimum, you're talking about issuing 500m shares to raise that paltry sum. That's nearly doubling the shares in issue and would still be valuing the company at £660k mcap post placing (assuming the usual effect of the SP falling to the placing price occurs). So not only have you see the SP decline because of the discount, there is a double whammy that you'll have given up half your exposure to HH/Brazil/Noricum via the dilutive effect. I would have serious concerns as to whether they could get any placing away tbh, given how illiquid it is and how fast the SP is sliding (although if DL has one skill, it's getting people to pony up for placings).
We complain that DL pumps stock prior to placings but that is absolutely what he has to do - otherwise the degree of dilution for existing shareholders is much higher. However his ability (indeed, inclination) to pump EVO has disappeared it seems. The result is a really nasty situation where the running costs of the company are a significant fraction of the total mcap.
The laws of physics aren't going to change - and unless the Sp has a major rally the necessary capital raise will be very painful for current shareholders both with regard to the immediate SP hit from a discount placing, and longer term with regard to reducing their share of the u
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