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Worst investment I've ever made - down 75% now - is this heading for penny stock status? Don't understand all the technical details of the company's financing arrangements, but what I'm getting from all this is that the company needed money and instead of borrowing it from a bank like everyone else they have effectively borrowed it from the shareholders - deplorable.
I've contacted IR and the chairman. The lack of any update is unacceptable. I suggest you do so too.
Abysmal management team. I have swallowed a huge loss. Can do without poor management.
Suppose the share dilution occurs. The underlying fundamentals and projected rise in profits into 2015 and 2016 would suggest the possibility of a financially simplified company (we hope: something the board can hopefully grasp) whereby the share pool is much larger, but the company might be able to launch an ongoing year on year modest buy back scheme, possibly combined with a low yield dividend: that might not compromise the longer term strategy. Might that work to make the company a longer term punt? I'm currently down 78% and could use some news that would help stabilise the price!
I agree and I hope we are right!! Its a bit painful right now for sure. Good luck, fingers crossed and all that.
Let's agree to disagree for now. My overall point is that all the uncertainty and negativity is now in the share price if you compare where we are now to previous highs. The negotiations will be ongoing at the mo and the outcome will be revealed to the market in due course. Hopefully blummin soon! Here's hoping for a positive resolution compared to where we're at now for you, me and all PI's
Frisby I'm afraid you are wrong, that is in theory. The GEF loan (assuming no cash repayment ability) has no backstop and therefore they could end up owning the whole Company. The other loan has a 29.9% ownership limit and therefore has got a backstop. So it is the GEF loan that is the real issue and, I say again in theory, quite evidently they could end up owning 100% of GKO. Whether they want to be that rapacious I doubt and that is the basis of my ownership. So in that regard agree with you that they will likely do a deal. The real leverage GKO would have and indeed it would obviate any dilution impact altogether, is whether there is already a cash option in the documentation. But the length of time it is taking them would indicate perhaps not although not having that option is plainly idiotic. But your comments re GEF wanting to maximise value well in that regard they are totally unconcerned about the share price now! Why should they be other than the lower it goes the greater % of the company they can own. That has no impact on their subsequent value as conceptually they will own all of the business!!
Firstly the equity will not be diluted to zero or anywhere near zero. Why do you keep repeating this? Again it seems like scaremongering. If I was you, with your punt, thinking the way you are, I would close your position now and take the 18% or so loss. The fact that you are still holding whilst at the same time unnecessarily deramping doesn't add up. I am well aware of the share capital dilution issues currently facing the company. However it is in the best interests of all parties to reach a favourable compromise. All stakeholders are on the same page and are pulling in the same direction. Obviously GIC and GEF will want there newly issued equity to be worth as much as possible in due course so it would not make financial sense for them to damage investor sentiment by overly imposing on GKO in the current negotiations. Check out the share register and you will see numerous II's with large holdings. They are invested because operationally the company is sound and growing. I believe a favourable deal (when compared with the current share price) will be struck with GIC and GEF on the issue of new equity. The uncertainty will then be removed and the share price will rerate.
I don't know why, but I've averaged down a little again today .. in the feint hope that GKO can arrange a deal which doesn't screw private investors like me.. when are they due to announce the new financing deal .. though that they were due an announcement imminently .. but in reality am I expecting too much?
Frisby do I take it you are not aware of their capital structure? You seem to dwell on PEG ratios ad PER, the latter being utterly irrelevant for a wind company where projects generate little profit in the early years but lots of geared ROE (hopefully), a result of depreciation and financing costs. Mind you even I would admit that, absent their stupid loans, the PER looks interesting. But that counts for nowt if the equity is diluted to zero!!
Not at all. It is self evident and is the basis of the punt I have taken. If the loan has to be shares then we could get diluted to effectively zero. But if there is a cash repayment option or if not if they can introduce a cash payment option then our equity should have value, that depending on the dilution, if any. So the performance of the business is all fascinating I'm sure but I don't much care about that right now. It's the status of the two loans that interests me.
A bit extreme don't you think. Almost scaremongering which is strange from someone who is supposedly invested here...
That's all well and good. The business may be ok but the structure could (could) dilute existing holders to nothing. If they can do a deal or cash settle it then it could be very cheap. If not the ords are screwed.
I would say this is the bottom or extremely near it. Check out forecast PE & PEG ratios. Double digit growth in revenue/profit/eps. Forecast profit for this year of £26mil and 2016 £44mil. Market cap £79mil. Bonkers. But then that's why we love AIM. Money to be made for those who can keep their heads and see through the madness. Thanks largely to the Chinese contingent people are unnecessarily blanket selling foreign companies on AIM and that presents opportunity. The baby has most definitely been thrown out with the bath water. Now is the time to catch that baby.
Hold your ground. The company is sound. Dilution fears are now overdone as always happens in the market. Now becoming a great entry point before positive RNS released.
17% loss already!! These jokers had better deliver!!
Then the other way to avoid dilution is to sell some assets to repay the loan(s). I'd rather this than equity issuance which would be stupid because, as you say, it dilutes as it would to repay the loan in shares. I believe the GEF loan has no dilution backstop and so is the more problematic. They said it would take two weeks so we are due something soon but I figure it'll take longer. But a mess.
Not sure they have enough liquidity here to cash settle both GIC and GEF which would require in excess of $150m. But they could repay GEF at around $46 - 50m. But my worry here is that a large portion of that $106m could be somewhat encumbered or trapped within project finance entities being earmarked or committed for future wind projects in the development pipeline - so not really readily available. Utilising the remaining available cash now to pay back GEF/GIC might unduly constrain the Group's liquidity or growth plans and require it raise new capital in the near future which could be equally dilutive as the situation we PI's now find ourselves in. Lets hope the management team can get their act together finally on this and manage to negotiate a sensible mutually beneficial deal with these investors soon - otherwise this company will be dead in the water when it wants to raise new capital again in future
Nope but I credit the management with having an option to repay in cash in the docs. To not have that is just preposterous beyond belief. Assuming it is in there then there is the small matter of $106m but that is certainly doable, likely not from immediate cash but certainly from some balance sheet cash then either a loan/bonds or selling assets. So my buy is based on an ability to cash settle. After all GIC/GEF probably don't want shares now.
Parkside......whilst I am of the same view, can I ask if you received specific confirmation from the company or its IR team regarding this recently? As I understood the timing of first conversion window opens up on 1 June which is next week so reasonably close if a deal is to be done with debt holders
Doubled up yesterday and today. Think they can sort the loans for cash and thus asset value is materially higher than here.
The non recourse project financing if structured properly should be ok. I don't believe that wind (decent) is valued at $600k per MW. Turbines plus BOP and grid in even the cheapest jurisdictions will be £800k/MW ie $1.2m/MW and so unless there is a large impairment going on here (which may be possible I suppose) then I doubt whether wind is generally valued at that level. If they are still using project finance then operating projects can't possibly be valued at $600k EV as that doesn't work if installed costs are $1.2m/MW!! So I think the issue is a poor management team with a poor capital structure floundering! At least I hope so.
Often enough companies that are inclined to "exponential" expansion through debt have consequences.
The is the second time I have invested in Indian 'Growth' story company, the first being Essar Energy. Both off the back of professional tipsters from investment magazines. I can honestly say both have been a disaster and as a regular visitor to India it should have been clear to me that the country is a mess and so are most of its businesses. I should have known better, but this is the last time I invest in an Indian business. GLA!