We would love to hear your thoughts about our site and services, please take our survey here.
@cahoodle, some things still make no sense. You say that this is a tried and tested model. But previously AZ has stated that there are no competitors. That doesn't really make sense. The rns today actually explains there are competitors - which suggests that AZ says whatever is convenient at the time.
I actually think there is probably something to this business. But the true sale model relies upon aggressive accounting - which is why solutions need to be bespoke and only tend to work with bulk commodities (oil, metals etc).
However even if the true sale model is very difficult this can still work as regular inventory financing. The only problem is that this is a very competitive market - and companies won't want to pay an extra fee to another intermediary (syme) without good reason.
@apunter2, all you're doing is proving a transfer between two parties I.e that sales and purchases happen. I don't even think these were transactions that were fully in cash. And these transactions all appear to be between insiders?? Many parties playing games behind the scenes just represents more red flags.
@james1919, I don't think that £170m market cap for a new business that is pre-revenue is at all low (and don't start talking about some small amounts of non refundable deposits). The company needs to prove that it can get a financing and securitization away. Larger investors may then start to believe in the model.
@extrader - "secured asset based credit agreement financing" suggests this is not true sale. You wouldn't use language like that if you wanted to convince the auditor that this was a true sale.
@extrader, that is an interesting article. Again it suggests that bespoke solutions for bulk commodities are possible. It also refers to the complexities involved - including the accounting issues. Also note that the article is from 2013. The new revenue standard, which made the requirements to recognise a sale much tougher, came in from 2018. I think it is pretty clear why there are so few companies trying to compete in this market. And let's be honest - if there was much potential to do this it would already been done in the US. The US is always going to be the most competitive with such financially structured products.
@wolfofwarks, I think that's right. Small/mid size Italian companies will have a very different risk appetite for the aggressive accounting which is inherent in this "true sale" model than larger companies in UK/USA. Even though many of these companies will be applying the same IFRS standards.
Not that I'm suggesting there aren't very large companies in Italy or of course very small companies in UK/USA. I'm just pointing out that that there are different tolerances for such practices based on size of company and geography - partly due to the different regulatory/enforcement mechanisms that exist.
It's good to see you back AP. I was pretty sure that your leave of absence would be a short one. I hope you are feeling better.
During your absence we agreed to all be civil, and not to criticise and accuse each other. WG can fill you in.
@hardcoremechanic, at some point I may take a position here. But regardless of what position I take I'll always be open to debate, to alternative views and be courteous to others. And I sleep very well at night thank you.
@beforegolf. Thanks. I can see that with bulk commodities there is more potential here. Companies hold such commodities at various sites and quite often exchange stock to facilitate transactions. For any type of specialised inventory it is much harder to demonstrate that control is transferred. Which is what you need to do to achieve true sale for balance sheet purposes. I also note that the second reference is to an article that was written some years back. And the new revenue accounting standard only came in from 2018. Both for us gaap and IFRS. I still have major doubts over the accounting for this - at best it is very aggressive.
@extrader, a daily demand of 330m of a free float of around 5bn represents 7%, and an implied average holding period of around 15 days. Is there really no liquidity issue here? 7% changing hands each day seems very high to me. But I have no real idea what normal would be for a similar share.