RE: More news to come5 Sep 2021 01:58
"PS could you please tell me what the valuation of the company was when investors were paying £1.02 a share."
The valuation at any point in time is what people are willing to pay for it. So you could say that the valuation was £1.02 a share, just as it is now £0.0145 a share. The question investors should be asking is what the valuation is based on. At some point in the future all the realisable assets will have been produced, and the value of the company will have been the discounted cash flows to that point.
The market is a forward pricing mechanism that tries to guess what that value will be. Sometimes it will be wildly over-optimistic, sometimes not. The nature of an exploration company is such that the future assets are to a certain extent unknowable. Investors essentially have to gamble. Based on the chances of drilling success that were broadcast by the company at the time, the chance of three back-to-back dusters was only one in three, yet that's what happened.
The triple whammy for investors was that the gas-in-place that had already been found was worth a lot less than they might have been led to believe, and SOU left themselves in a position where they could not afford to exploit it. For the time being, SOU is no longer an exploration company, it is a production company and is being valued on a very different basis. Who could have guessed that from the time of that £1 valuation, it will have taken a minimum of SIX YEARS before the first gas comes out of the ground. And even then it will only be at one sixth of the optimum rate, until money is raised for a pipeline.
Meanwhile, SOU has printed shares like confetti since then: A BILLION OF THEM, the better part of a million every single day on average. It has also paid theough the nose for the debt it took on, and continues to carry. And there is still no funding for a pipeline. Does anyone remember that SOU advised they had an indicative offer of pipeline finance from OGIF's funder nearly four years ago? One wonders whatever happened to all that?
With a litany of failures and empty promises, it is hardly surprising that investors have marked their valuation down by over 98%. If SOU ever achieves a fraction of what it promised, it will be worth far more than today's valuation, even given the dilution factor of nearly three in four years. But the market isn't willing to bet on it until it sees actual progress, and with good reason.
The company's bullish announcements over the last two years all concern efforts to merely keep it afloat. A few people continue to read more into them than is warranted, which is why you see price spikes following by fizzles. The company itself has warned them that it is worth LESS THAN ZERO until pipeline finance is raised. And when that happens, it will still be worth 90% less than the heady valuations of four years ago. But perhaps SOU will then once again be an exploration company.
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