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I love the healthy debates here.....encouraging. The concern on the minorities being shafted is real - there is nothing to give us comfort that the board is acting in the interests of EVERYONE - each one of them is selected and appointed by Seafox, including the so called independent, and their allegiance lies with Seafox. And this is the biggest risk today, not operations.
@sirimcbonus - thanks for highlighting the points - fully agree
@AA2020 - ok with the capital raise, just not ok with the terms. Valuing it at 3p, when its trading at 7p, is just shafting the minority . This is a company they tried to buy some shares at 18p in 2019, and buy all at 10p in 2020, and bought a nice chunk at 22p only 12months ago. The amount raised is GBP 20m, and are we to believe that the board that negotiated an annual saving of $25m in interest cost can not raise new capital without giving new investors/underwriters a steep discount? Are we to believe that they could not convince institutional investors that the pre-money valuation is GBP 25m when things are looking bright? I would prefer for the VOTE to FAIL, warrants get issued, and EVERYONE gets diluted. OR push for liquidation and sell the assets - that would need special resolution which needs 75% vote (but correct me if I am wrong). I would also VOTE against re-electing the board - they have done a lousy job.
The timing of the issue - 9 june announcement, with date of record of 7 june - ensuring noone buys it to block the deal. And a 25 june general meeting to approve it when the capital raise closes on 23 june - that is some f**ed up timeline....isnt there regulation surrounding these? FCA sleeping at the wheel, as usual, till the boys from UAE rip off shareholders (remember NMC and Finablr?)
140m shares traded on 9 and 10 june combined - that is 40% of current shares in circulation - who are the new incoming shareholders? How did the board line up institutional investors to cover the open offer by 5PM on the 9th of June, the day it was announced?
BOTTOMLINE: SF wants maximum dilution so as to have fragmented ownership.The board is comprised of SF allies - in effect they control the company. I am scratching my head too as to why they haven't bought out the company if it was that great. Makes me extremely nervous. My thesis is that they wanted to make a bid at 10p, which would not have passed. 20p bid would have gotten approvals, but thats perhaps too much for SF - honestly it isn't. Will they make a new bid at 15p (7p post raise)? Time will tell. Will it get approved? Absolutely!
In my mind, what is done is done. The capital raise will obviously all go ahead. Looking forward, the big risk as I see it is SF and friends swoop in and bid for the company at a low ball price, like last time. Albeit this time, at somewhere between 5-7p. Even at 10p it would significantly undervalue the equity. I therefore have been scratching my head as to WHY the new Board are talking a big game around all the improvements and turn-around initiatives (cost cuts, higher vessel utilisatations, higher day rates, significant interest savings, etc.). I mean, that's all wonderful stuff, but it doesn't do them any favours IF the grand plan all along is to launch the next bid at a low ball price. Additionally, while they may get over 50% of the votes with any low ball bid, they would be a far cry from the 90% required for a squeeze out and de-listing.
Like the 2 previous bids at higher prices ?
You are catching on...
@ sirimcbbonus "and when they do, who is there to mop these up ? Seafox of course."
Seafox can't mop any more up - they are already at 29.99% without triggering a bid.
@ 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.