RE: New Gold Chat6 May 2023 22:50
Dai.
Below is an abbreviated collection of reasons I've seen posted against SYME that their supporter have never been able to counter, so I'd exercise extreme caution!
> SYME looks horrendously overvalued for the stage they are at.
> I wouldn't buy into the hype of a stock funding deal that's going to generate something like £50k in top line revenue. Vs 50m market cap.
> Inventory lending... It's not new, it's a very risky form of lending (for the lender) that's why most banks moved from providing stock finance to company for goods (like tyres) that can easily go walkies!
> Inventory financing is very common in the retail car dealership trade, and in the manufacturing sector which SYME is said to be focused on banks nowadays lend against confirmed orders/trade debtors as its much much lower risk.
> In the scenario that a manufacturer has already exploited the traditional forms of lending and already fully borrowed against their future receipts then to start borrowing funds against their stock it probably means they are a loss making business and if they then effectively borrow twice their working capital requirements they are on route to going bust...Quickly.
> The borrowers traditional bank who will be secured against the debtor book will likely get their money lent paid back as the trade debtors are assigned to them and can also have credit insurance in place against bad debts.
> Not nearly so good for the inventory lender SYME. By the time they turn up asking for there loan back against the tyres the warehouse will probably be completely empty and a 'closed down' sign will be swinging on the door.
> I'm sure that this lend SYME have made is all nice and safe and nothing like that will happen, but as they try to scale that type of lending up 1000's of times over (which they need to do to justify theit market cap) the chances of a large percentage of these inventory loans going bad massively increases and all of sudden a loan book of non performing assets and write offs will ultimately be left for shareholders to pick up the pieces.
Good news is that it looks like its given long suffering shareholders a brief opportunity for a quick pump to get out and no doubt spike a whole new set of holders at an unjustifiable valuation.
If it was 5m market cap, I'd maybe take a very short term punt,. Not at 50m+ with only one small deal...
Not one I'd want to be holding come close of play on Tuesday as no doubt the naysayers will be back all over that bb reminding everyone of the above and unless they can counter these valid points then it's likely more dilution and pain for shareholders awaits around the corner.
Sign In
Follow the stocks
