what a hero ;-)5 Mar 2020 21:52
On Monday, the largest oil company on the AIM Casino, Diversified Gas & Oil (DGOC) will announce annual results and give us an update on its proposed move to the Main market. The shares were 126p back in June when Oarfish Research kicked this off with a stunning four part dossier which has been followed by a series of accounting exposes on this website. The company is clearly in breach of IFRS and I have reported the company to the FRC, so what is happening. The shares are now 76p.
The yield is a stonking 14% which sounds too good to be true. I suspect it may be. Having raised £177 million at 117p in March c/o crony capitalists Cenkos, Mirabaud and Stifel, the company has responded to my criticisms by insisting that it is business as usual and spending £50 million of the cash on buying back shares at ever lower prices. The buyback ended on 14 February and since then the shares have fallen rapidly from just over 90p.
So is that yield telling us that this is very cheap or very expensive? I flag up a few possible worries.
The company is heavily indebted which makes the share support operation (oops I meant share buyback) even more reckless. I am aware that Diversified is heavily hedged but as oil prices collapse how secure is that dividend?
The company has new auditors – will PWC insist that the company adheres to IFRS in the way that the previous mickey mouse auditors, Crowe, did not. If PWC reads its own guide on the matter and follows it then surely there will have tyo be massive restatements of historic reported profits all the way back to the IPO, decimating them in some years, wholly eradicating the in others. That would have real implications for the asset backing, gearing, the ability to borrow more and the dividend. Might my good friends at the FRC have had a few words following my letter?
The company has said that it is moving to the main market. So did the fraud Quindell and the joke Avanti Communications. The FCA which regulates such admissions is tougher than the Oxymorons at AIM Regulation. Might there be a postponement if the FCA cares about IFRS breaches?
This has been a great short. If Diversified can avoid any of the hurdles above, the shares should bounce although what it would say about PWC and the state of the audit profession does not bear thinking about. But if Diversified stumbles on the matters raised above the shares will head sharply lower even from here. So far my research has been a darn sight more inciteful than that of Cenkos, Stifel and Mirabaud who earned just under £10 million of coke & hookers money from that placing a year ago.
Bring on Monday.
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