Cobus Loots, CEO of Pan African Resources, on delivering sector-leading returns for shareholders. Watch the video here.
I wouldn't buy until they can prove they can get a financing away. Until then this is all just hope value in an unproven business model. Only risk what you can easily afford to lose until a business is proven to work.
It depends. All sorts of things could have happened. Just because a share delists does not mean that you lose your ownership rights. Although it is often not a good sign - from a value perspective. You'll need to research what happened to the Chinese company and your particular interest.
Yes - the results aren't actually that bad given the circumstances. But with the sell off today I'm not quite sure what investors were expecting??
@seadoc. The risk on interpretation of IFRS is on page 18 of the doc you link.
I think the loss of 226m is a bit of a red herring. From what I understand they got the initial accounting wrong - the interim accounts show a very different balance sheet from the prospectus. They shouldn't have recognised goodwill. I'm guessing (and only guessing) that when the auditors told them the accounting was wrong they were pushed into having to treat this as the adjusting entry on the reverse acquisition accounting. I suspect it is still wrong (in amount). Pretty much all of it was a share transaction anyway - cash movements were pretty small. But it does not fill you with confidence in management.
I wasn't aware of the short position by shadowfall. Do you have any other information on this?
I agree that much of this is very murky, and raises red flags.
I have no position here. The market cap does not make any sense to me. But the market can stay irrational much longer than you can stay solvent. Shorting these kinds of stocks is very risky.
I've just seen that page 18 of the prospectus does highlight the risk around the accounting for the derecognition of the inventory. Each client and auditor will need to do their own analysis and form their own view.
It does make me wary that they define originated portfolio as a pipeline of prospective contracts! See page 2 of their last interim accounts. Sounds a little misleading to say the least.
I also note that they have recorded a loss of £225m in these accounts! That's quite some going!
Of course you can verify all of this information yourself. I've provided the references.
@futuresbright. I'm not saying there is not a valid business here. It is just the current market cap of £240m that seems to make no sense - given the current position of the company and that the business model is not really new and could be very easily copied. Of course penny stocks can go up or down in the short term.
@smalltimeamateur - I suspect you are right that prospective clients will struggle with the complexity of the arrangements. They will want to get sign off from their auditors that this will be treated as off balance sheet. And I can see reputable auditors having difficulties with this. Inventory that has been sold but is then taken back on consignment is going to raise all kind of red flags.
To get inventory off balance sheet you need to transfer control over it to the other party. If the company can't get this off balance sheet the attractiveness of the arrangement is much less. And I'm not sure how they would get this stuff off balance sheet if it is still on site and subject to buy back. This doesn't mean the arrangement doesn't work. But it will certainly not be as attractive. Many companies offering similar types of arrangements have struggled with this issue. And I don't see any explanation of this from material the company has issued. Please do let me know if you have.
@mickluv - what are you, a 10 year old?
One thing that I don't quite understand is how these can be full sales of inventory. That would require the the company to transfer control of the inventory - which does not fit with it retaining the inventory at its site and being subject to buy back. I can't see this explained anywhere. Any ideas?
A new company with £2m, no track record and a business idea that seems pretty unoriginal and with very low barriers to entry, trading with a market cap of £240m. Come on....! It may even go higher in the short term. But at some point a lot of investors will lose a lot of money.