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@ sirimcbbonus - agree with all the points re: corporate gov issues.
Re: the "unnecessarily low price" - it had to be at a discount to prevailing share price. And given the microcap nature and other uncertainty around the company, I suspect it required a heavy discount in order to get it done. Could it have gotten through at 4 or 5p instead? Probably.
What I dont like about the raise is
1/ The lack of notice on the terms of the raise.
2/ The lack of clear up to date guidance ...where are the Q1 figures ?
3/ The unnecessarily low price. How do I know it is unnecessarily depressed ? Seafox bought more shares last year and this at a prices well above the current sp. and in the teeth of the oil price collapse , tried to bid for GMS ie. they found the company attractive even last year. Subsequently, we know the vessels are in higher demand and earning more, so why the lower price for the offer shares.
I have subscribed in full and applied for excess, but the board's actions have been designed to worry and rush shareholders, who will therefore be less inclined to subscribe for their shares...and when they do, who is there to mop these up ?
Seafox of course.
A failure of corporate governance, but I see end 2022 net debt $280m and a $100m op profit supporting a share price of around 21p [x5 operating profits] and the banks waiving the obligation to raise the $50m, due to cash generation.
If x 6 valuation 28p...gearing works both ways!
And if shareholders vote against the capital raise and the capital raise therefore does not succeed, warrants are issued and/or the company is back to square one with the banks. It's clear they need to get a capital raise done. What exactly do you dislike? The idea of the capital raise or the terms on which it is being offered?
@sean Yes, not sure how many agree with our view. Also not sure if SF and friends have 50% of the votes since I dont see Horizon subscribing to the issue, although this could be to make it look like they are not acting in concert.
Sean Trading in UK and happy to wait for a while. It would be wrong to specify here as I wouldn’t want to be accused of a cross ramp nut rainbow is indeed one of 4 I’ve taken a position in.
@4 Corners I would voting against the capital raise , but think ing it gets 44% agreed, chance of against succeed is really small, you don't expect all of 55% shareholders interpret the situation as same as you and me.
believe new shares start trading on 28 June.
And the AGM is on 30 June
@4corner, how long the lock down period would be between now and the pay date, I remember AGM is 25 June?
@ seanx - the raise will fail ONLY if shareholders on record as of 7 June vote against it. The capital increase money has already been committed - 45% from Seafox, and the other 55% is covered by institutional investors if shareholders don't take up full allocation.
Voting against the capital raise is not a bad thing- theoretically you can not get less than 3p in such a scenario vs there are no guarantees on what you will make after the capital increase.
Not been here for few years now but took my first tranche as a punt this morning.....I think that after the big placing will be completed and the major reorganisation of the balance sheet the company has a fair chance to recover after being in serious difficulties in the last few years....along with it so will the SP.....hopefully.
GLA.
4Corners, I think market sentiment is worrying about what if shareholders not taking the full allocation, then GMS failed to raise 25m, the default fears will be looming again. The shareholders who take up the open offer will still facing a company with financing facility issue. these fears very often overshadow the EBITDA which is very much depends on utilisation rate change.
Fergusinv, just saw Rainbow Rare Earth , rised 11% this morning. they are very high now, but seems still in the up trend. when come to trading, Capital efficiency will be good on this kind of stock . Happy for you. just UK stock volume is really low for charting to be effective. Or are you trading on US rare earth stocks.
Why is it not trading at a higher price then, if everyone knows about the EBITDA for this year? Oddly enough, the new mgmt has not given any guidance or done an investor call or presentation, which has been the usual practice (and is standard for listed companies) since IPO.
Certainly am, in 2014, when they had 10 vessels, utilisation rate was 97% and operating cash flow of $123m.
Current year utilisation rates 81% , but we now have 13 vessels.
Enterprise value at 31/12/20: Total liabilities = $448 - current assets $36m = -$ 412m [ignoring fixed assets] - $25m from open offer= $387m
+ equity 1.016bn shares at 3p =$40m
so about $427m EV earning I estimate around $70m ebitda this year and $130- 160m peak, looks v cheap to me !
Debt will start to get paid off rapidly from H2 this year.
Let's see...
To be clear, anyone could have sold their entire holding this week at 3.2p+ and bought them back at 3p in the open offer, by partially taking up their entitlement.
I think a lot of holders will take their full entitlement though, and many will apply for excess.
I think most of the shares (maybe all of them) will be issued under the open offer, and very little will go to the placing.
Fergusinv - you are spot on. The question I asked myself is "are there better opportunities with lower risk of minority getting shafted".Personally think its a great opportunity with oil at current levels, but by scaring away institutional investors, this will remain a not so well bid stock, in my view.
Surely everyone is taking up the offer.
If nothing else you could sell the same amount of shares from your existing holding at a higher price and use the cash to buy the offer shares at 3p.
Your logic based on the numbers you quote is sound enough Sean. Perhaps a little simplistic but it’s sound.
It’s the previous shenanigans and continuing up beat narrative that causes me concern.
They’ve just announced a placing at a 50% discount! Long term holders got well and truly burned. A question I ask myself is “am I buying because I like the long term prospects of the company or am I buying because I feel pressured into trying to protect my original investment.
I have only a very small holding and I’ve no desire to increase it even at a small ( in monetary terms) paper profit.
I will keep a watching brief here but I’ve been diluted to the point were I’ll not lose any sleep over it.
I believe there’s better opportunities out there particularly in rare earths and I’m certain you’ll see a consolidation here fairly quickly.
It’s just not for me Sean.
Fergusinv, you are right , there is many share price fall below their right issue price and open offer. for GMS, too many factors to consider . Maybe keep it simple: to think a company with 44m(2020) cash generation , of which 27m (2020, should be much less, as negotiated lower rate, and reducing balance by 25m after equity offer) paid to borrowing interest, worth 33m MV or not . if you don't think it is worth, sell your shares. there is no point keep the shares not subscribe to placing. if the placing failed, company facing more trouble. that is why I sold mine first, if share placing not get proved , nothing to loss. But it is a bit dilemma to decide taking the offer or not, if you don't take it , you get diluted (or loss to admit) at 9 June for nothing. Correct me if my understanding is wrong. IG gas set up deadline tomorrow, it is bit annoying.
on the bright side, we have millions of shares traded these days :))
AA 4 Corners and Sean.
You all raise valid points and I read them with interest. My “billions” statement was an exaggeration to prove a point.
My rationale is simple.
I’ve taken up these offers in the past with very mixed fortunes. Ultimately the market will decide based on the success of the open offer and any potential fund raise. I have known prices to fall below the offer price on many occasions in the past. Perhaps not always immediately but it’s certainly not a given that 3p is sustainable in the short term.
The over riding factors in this for me are;
my belief in the company’s potential,
the previous activities of SF and their cohorts
and whether I have faith in them to deliver for PIs.
@ AA2020 - always look forward to your well thought out and structured comments (ib background?)
I am undecided about my allocation - its a sizeable chunk. I am definitely VOTING AGAINST the capital raise though, and I would recommend the 55% of holders to do so – you can not lose more than 3p ??
" give comfort to the underwriter Panmure that they wouldn't be left holding a significant chunk of shares" (some doubts about the IB background now). The discounts don't matter, because the share price will adjust. And not like they are sitting on a big discount now to the offer price. Its all about the amount they are raising - the right question is "is panmure happy to hold $15.4m (55% of 28m) if enough institutional investors don’t bid in the offering?” and it seems they have been taken up by institutional investors already. Did you notice the 5pm deadline for bids? I guess SF already lined up someone
Messrs Aberforth - if you believe the prospectus, they will hold same number of shares post the raise. So perhaps they sold at 3.2 levels and will subscribe at 3p. I dont know why they hold it in their portfolio – miniscule. Do note however, that Mazroui has increased their stake at the 6 or 7p levels in April (they are an insider who definitely knew about the 3p) by purchasing from Aberforth. Makes me wonder if they have a ‘vote issue’ on the 25th
I do not debate on the value. There is definitely value, but so far my thesis on the fact that the board will screw minority has played out, and I don’t expect that to change.
I like how you said 5p – do u know something? So if you do the calculations, you will see that a 5p bid post-capital raise is the same as a 10p bid pre-capital raise and SF injecting $25m into the company. So that is the base case scenario, if they want to make a bid. Now, remember the 22p transaction for 8%? The equivalent of that would be 9p post-capital raise. My guess is that the bid, if they do decide to bid, will be somewhere between 5p and 9p. Each 1p = $10m off the purchase price. Most likely, they will have diluted all the previous investors who opposed the bid at 10p, replaced them with their ‘friends’ coming in at 3p, and make a bid which will be approved. Maybe I give too much credit to their financial engineering, but Seafox chairman is an ibanker, and so is Man Capital representative who joined the board last year (only to resign in few weeks).
Of course, I can think of multiple other ways for SF to screw us all. But since they have friends in the game, perhaps they will be a little nice to us, eh?
AA, the entitlement based on the positions as of Ex-date minus one, Aberforth just sold the current share to take up share placing, institutions has regulation on percentage of fund located to certain credit level of company. if the cap reached, they can not add position but simply liquidate current position to take up offer , so % not exceed their total fund value stated in their investment policy.
GMS is so far my worst performance share, but even before share placing , my average is 7.4p. I sold at 4.20 at opening 9 June, but have not bought back. I still entitle to all 19 to 10, I decide to take up. once it goes through, new shares can be traded. my prediction is at least can sell at 3.20 for short. for long term, once company had 25m to reduce debt, MV should pick up according to earning.
Hi 4Corner, Fergusinv. thanks for your opinion. Yes, some share do fall below their opening off price in long run sometimes, not very often,due to due to worst blow. But for GMS now, if you look at google price, before 9 June, the price is not at 6-7 p anymore, instead of 4p range, it means these right do have value, if you do not take it up, you loss your value at opening of 9 June for nothing. I use 3p to time 1,016,414,582, (the Capital Raising will result in the issued share capital of the Company increasing to 1,016,414,582 Ordinary Shares ),got 30.5m MV, little over 10% discount on todays £34.4m MV. What is your calculation? just in short term. not in long term,