Member Info for Franalex

The bank manager would ask, “what is your track record of delivering what you said you would do, at the time you said you would do it and at the cost you said you would do it? If your record is one of failing to deliver, why will you be right this time?” This conversation happens all the time on investment funding from banks and other investors.

Also have a small holding in this one and still under-water. It is also taking longer to come to cash generation and I fully expect them to have to raise further cash before we see any kind of return and there is more location risk. Like Sirius, it is a gamble that could come good but may see initial investor wipe-out.

Aubery,

Whilst there are differences, there are also similarities, ie the urgent need for cash and inevitable failure if it does not arise. Why did I invest? Because I recognise there is a valuable asset and had hoped that the management had a business plan that provided for enough cash to bring the site to production without having to do what in essence is an emergency raise. I have another 9 business in a 10 share high risk portfolio, 3 are doing well, the others may come good but the chance reduces as time passes. A common theme of those doing badly, is over optimistic management who built nowhere near enough contingency into their cash flow planning.

Yuri,

I am merely pointing out what was being posted and those posters continually dismissed those making the points you are raising. I totally disagreed which is why I predicted that both Debenhams and TCG would fail and was shouted down by many. I am just predicting here that there will be a massive dilution of existing equity holder, time will tell if I am right, and as I said I hope I am not.

“It’s not like those companies” just what posters were saying about Debenhams and it’s valuable Belgian business, and TCG and its strong brand and busting billion turnover. Likewise cases were being made why Carillion, Flybe, Interserve and Afren had their own unique value. . The fundamentals are the same, in that it is a business trading cash negatively, which will eventually run out if new funding is not found. I am not disputing that a backer will be found, just that this funder is not likely to look favourably on equity holders, they do not have to, and never do.

Aubrey, just wait and see. I called both Thomas Cook and Debenhams correctly despite the boards being full of individuals claiming that Ashley, on Debenhams, Fosun on TCG plus any number of potential white knights on both, would come to the rescue. I just base my assessment on 15 years as a CFO and having completed over 25 deals, some of which were distressed businesses with good long term potential but no cash to see them through. Hope I am wrong as as do have a small shareholding as part of a number of high risk young businesses of which I would expect to lose on 70% just do not know which 70% but now suspect this is in the very high risk category.

Dilutions are normally much greater than this when you have a business that is consuming cash. The new funder will be able to dictate terms and would be surprised if existing equity holders end up with more than 5% and could be less. Suspect this is what is largely priced in.

Do not think the project will fail but the most likely beneficiaries are the next round of investors who have the cash to bring the project to a cash positive position and therefore will be able to dictate the terms of their investment.

There is clearly an asset of significant value. I think the problem is that private investors think it belongs to them and do not realise that the business is consuming cash and will run out before it gets to production, in which case the shares are valueless. If the directors have cash forecasts that show they can not meet liabilities as they fall due, they have to act as soon as that is a reasonable prospect, despite still having money in the bank. There are many examples of businesses going into administration with money in the bank but not enough money to meet future liabilities. I do believe that the asset will produce a lot of profit but the current investors will share little if any of it. In my opinion, there will be a massive dilution or an administration and the current share price shows I am not alone in this view.

Agree that it does not look imminent but the business is trading cash negatively, as you would expect at this stage of development, and unless it secures new funding, it will eventually run out of money. Once the cash forecasts indicate that they can not meet liabilities as they fall due, , the responsibilities of the directors changes from acting in the best interest of shareholders, to acting in the best interest of creditors, which generally means the providers of debt who frankly, do not care about the ordinary shareholders as we have seen so often this year.

Think it is very unlikely to be liquidation. Be far more likely to be an administration where a new buyer with cash to bring the project to fruition, picks up the work done so far for next to nothing at the expense of the initial investors. An all to common situation in this type of business where I sufficient funding is secured at the outset due to over optimistic assumptions.

Hope people were actually realising he was talking sense rather than the ill-informed drivel that some were posting suggesting people buy.

HK
What did happen to Paulplantearth who was posting regular strong buys several times a day, for weeks?

Mark,

Agree a suspension looks highly likely and total shareholder wipeout is now more likely than not. Would not be remotely surprised to see a pre-pack administration announced early in the week.

Where would you stop? People currently calling for bailout of Sirius. What about Debenhams, House of Fraser and Patisserie Valerie to protect the High St. Flybe? Carillion and Interserve? These are just some recent names

Suspect many investors, who are prepared to admit it have their own stories. I lost a lot of money many years ago, continually averaging down on Marconi, that once huge ( to big to go under, government will bail out etc) company where recovery was only a few weeks away. Recovery was not there and this lesson has stopped me averaging down since.

Except Ryanair is a profitable, sustainable business in a very difficult market and whilst you (and me) may not want to use it, huge numbers do.

Avocet,
Nor Debenhams, Interserve, Flybe or Afren to name just a few more. There are just so many instances where initial investors and Boards completely under estimate the cost of bringing projects to a cash positive position and run out of money before. Suspect the same will happen here, initial investors will be largely wiped out and someone with deeper pockets (and possibly more realistic expectations of time frames) will benefit from the initial work. Just very sad to see that some people have gone against all sound equity investment principles, and invested more than they can afford to lose.

And what has happened to Paul... who was on the board daily for weeks promoting this as a strong buy? He was not alone, just hope that individuals did not lose money by believing some of the rubbish being posted on here in the way that a number lost money on Debenhams by buying into some of the absurd recoveries being predicted.

Agree that it does have a unique product but there have been other examples in the past where it is the second or third phase share holders who make the money after the initial investors are wiped out through an administration or massively diluted via a debt for equity swap as the cash requirements are so often way in excess of initial estimates. There is another potash company at a similar phase listed on aim with continual cash demands.