Member Info for Deepvalue85

Yes, it is a basic answer to a basic question. However, just because it's a basic answer, does not mean it is incorrect. Occam's razor springs to mind.

Perhaps a more complicated question would be... why were there so many more large volume buys than sells? Or, why were there large volume buys after the rns was released? Those are more complicated questions. You can still apply Occam's razor to those questions, but it becomes more difficult.

But all you can really take from those two isolated buys is, someone believes they can make money from buying them.

@slacker246,

Because whoever bought those shares at that price think they can make money from it.

If it is "Flat-lining", then why is it not doing so within the range of the termed proposed equity raise options?

Morning MIKODX,

I agree you should pay close attention to what the company has stated in the rns. I also agree that the company is stating the best solution for them is to restructure and delist. If we stick with this logic then:

1) the company has provided a forecast (note forecast) of between £350 and £450m revenue at circa mid to high teen EBITDA multiple. If we take the lower bound revenue range and work with a median EBITDA multiple of 7, that equates to £24m at 1 x EBITDA for the business post delist (note the reference to pre IFRS16... that's interesting because post IFRS16 inflates EBITDA due to the increase in interest expense from my understanding).

2) if we stick with the theme of logic, why would the share price be above the stated equity range of 1-5pence? I cannot understand why? Do you have any thought (not conspiracies) on this?

Morning JT77,

Why would Julian purchase more shares when the two options presented would be a lower cost to aquire and take private?

Morning PAD004,

Why would the trading update be positive? In the rns statement, it was suggested that should the equity raise and delisting not be approved, the business would likely go into administration. Surely the statement would have been written with consideration to the current financial position of the company to date?

Morning all,

I have been scratching my head the last couple of days. The rise in the share since the proposed delisting and equity raise announcement initially made zero sense to me.

My initial thoughts were as follows:

1) it is short positions being closed out. However, my thoughts were these would have been closed rather quickly and would not result in a steady linear share rise of the last few days. I think that can be ruled out, unless someone can provide evidence to the contrary?

2) it is new entrants gambling. This initially seems plausible, with the share price tanking and inexperienced people having a wild punt. However, again, the steady linear increase in share price does not reflect that. I would've expected more volatility to support this theory.

3) The business is undervalued. This again would make sense. However, with the rns announcement stating the equity raise offers at either 1 or 5p, and given all known information about the company, this just doesn't make sense. Why is the market price not within these ranges? If someone has a clear logical reason I would love to hear it.

4) My conclusion. If the above are all ruled out, then there can only be one explanation I can think of that would support the rise above the stated equity raise price; there is a buyer building a stake. What evidence supports this? I have looked at the transactional data over the last few days since the rns and what really stood out was the vast number of regular large purchases of 50k, 100, 200k share purchases.

Can anyone disprove the above or provide other factors which may not be considered?

Thanks.

Pretty good reasons and likely explain why the company is priced the way it is.

Slacker246,

What would be your reasoning for sell?

Well,

If you have a short time horizon with this company, I would treat it more as speculation, not investment. Speculation is more akin to trading as you know.

Apologies if the above sounds condescending, not my intention.

Rock8,

Are you a trader or an investor?

Good luck rock8, I hope you succeed.

If you had too much faith in JD as a person, have you learnt something? I know I have.

Rock8,

You already know the answer. Nobody can tell you whether the investment is right or wrong, and there are so many reasons for this.

If you are an investor, you look at valuation, you study the business, you look at all the ratios under the sun, you build models, you try and analyse what the risks are.

If you are are a trader, you look at price movements, you look at volatility, volume, technical analysis tools, sentiment.

Nobody on here knows currently what the outcome will be. You have to stick with your method, and do the work, and even then it might not work out for you.

I am a value investor, I look for undervalued businesses, and try and assess whether they fit my investing criteria, if they don't, I move on.

At the end of the day, and I know you know this, Nobody can predict the stock market. And nobody can predict a stock.

Is that based on logic?

It is obvious why the market priced in the equity raise, because it was insicinuated. It doesn't mean it is going to happen.

If you price the raise in, yes It cuts the valuation, but at these levels, it looks ridiculous.

There is so much fear, emotion, and herd mentalility here it's unbelievable.

The intermediate cfo is not part of the plc.

Julian owns 26% of the company. Which obviously means he doesn't own the remaining 74%.

He is not lord almighty.

I am simply saying that because the larget shareholder has said that he wants the door left open for a possible equity raise underwritten by him to get the company cheap, doesn't make it so.

Anyone who has a done decent valuation work on the business will understand why.

Why are people assuming it's going private? What, because Julian said so...

Rock8,

Have you run any valuation models pre or post the announcement of an equity raise?