The latest Investing Matters Podcast episode with London Stock Exchange Group's Chris Mayo has just been released. Listen here.
I wonder if they're talking to each other about how they manage the exit - or is one just going to make a dash for the door and leave the others to burn.
We could be getting close to the release of some news now - and almost any good news would lift the share price considerably - so how much longer can they afford to wait given the timescale its going to take to get out.
It almost feels like reading a typical Premier Oil update......disappointing.
There might be a message to Jeremy in there too - but I can't imagine him taking to much notice.
So the main take away from this - if we didn't already know it - is why we need to move focus away from the UK and the importance of the Wintershall deal as part of that process.
Taking a view over the next twelve months the share price still looks good value at anything under £3 with the potential to pocket 20p in dividends and hopefully reach or exceed the £3-60 value placed on the shares as part of the deal.
Stocknor - Just wondering what happens if the RNS does land? Share price could close at 25p day - RNS lands at 7am - stock opens at 8am 35 - 40p - straight into auction - could be 45 - 50p before you even get the chance to buy. You might think small to no chance - but it could happen.
Don't be ridiculous. The business isn't going to disappear - in reality the sums of money involved are not huge in relation to the order book and the potential future pipeline. Other than the short's it wouldn't be in anybody's interest for the company to fail - it would just cause a headache all round for everyone - and that includes the banks. They will find a funding solution - what we are really arguing is how much of the company remains in the hands of the existing shareholders.
It would make a much bigger difference this time. In 2021 the new share issue was approximately 50% of the existing shares. Under the open offer shareholders were allowed to apply for 1 share for every 4 held - resulting in a dilution even for those who took up the offer in full. At these levels to raise £100 million would require 100% of existing shares to be issued - £200 million 200%. Again if its in the form of a placing existing shareholders are unlikely to be able to take up new shares pro-rata their existing holding - so its going to be a much bigger dilution - with upside limited by the much bigger total number of shares in issue. The shorts seem to be banking on this as the outcome.
The way out of this would be for the company to get the share price up in the short term - contract completions, upfront payments, asset sales, extended loans or new contracts and then carry out a capital raise later in the year at a higher price if it can be deferred that long - possibly as part of renegotiation of the RCF. If they can do this we might just see off the shorts.
Things might get interesting for the shorts if any equity raise comes in the form of a new strategic investor - particularly if they are subject to a lock in agreement of say 12 months. What price would a new investor pay - a discount, parity a premium? Simply removing the short term uncertainty should result in the share price moving up significantly. With the shorts at over 10% (realistically probably more like 12 - 13% in total) they would be left scrambling to close these positions out of the 55% of shares presently available - the other 45% held by long term investors, and none of the new share available to them. Could get interesting?
Exactly. This was never going to progress upwards in a straight line - we're going to be dependent on the news flow from the company. They said that they weren't going to provide ongoing updates on progress - so we will have to wait for the next announcement which requires an RNS. In the mean time the shorts are going to keep playing. But what I do believe is that at some point this is going to be worth a lot more than 42p.
They can obviously outspend PI's at the moment - but trying to hold out until a refinancing would seem to be a hugely risky strategy. I think any refinancing in the form of a placing or rights issue would be the last part of the jigsaw - and the company will be hoping it can be conducted at a higher share price than at present. Short term finance, bringing in money due from contract completions, potential asset sale and new contracts are all likely to be announced ahead of any refinancing. In effect the company will be saying they've fixed the short term issues - this is our order book going forward - now give us the finance to see it through.
What we don't know is if the shorters are also now building long positions.
With momentum out of the share price rise from last week it seemed incredibly easy for the share price to be walked down yesterday on incredibly low volumes. At these levels shorts could be starting to mop up any loose shares that become available. As far as I am aware they only declare actual short positions - so would only have to declare a decrease when they return shares - they don't actually declare their net position if they are also long.
A rights issue wouldn't be a disaster if a capital raising exercise is required. Certainly its not as bad as a placing where a few favoured institutions are able to pick up massively discounted shares and leaving existing PI's high and dry.
The most important thing on Wednesday is going to be demonstrating that they have a credible plan to plan to move forward. That should stabalize the share price in the short term . Any interim financing arrangements or asset sales should then buy enough time if a capital raise is required. This wouldn't be a disaster as long as they can raise enough to put the company back on a firm placing - and existing shareholders get a chance to retain their stake. Its not going to be a quick fix - but equally I don't think we are going pop just yet.
I get the feeling now that Wednesday may not be the crunch date.
I think it will turn out to be another holding update which will provide more information than last Mondays RNS without actually providing resolution either way. It looks like some form of capital raise will be required - but they'll try to do it after after stabilizing the company with some asset sales - so probably wont' be announce just yet.
The question will be how much they can raise and how long will it take to execute. Will it be enough time to allow a rights issue involving existing shareholders or will it be a stitch up with a placing.
I'm fairly confident that the company will survive in some form, and the update will make a lot about protecting all the skakeholders. It's just that existing shareholders will as usual turn out to be bottom of that particular list.
For shareholders the uncertainty will continue and the shorts will see no reason to close just yet.
If anything it should be the company contacting the FCA to request them to investigate - not individual PI's. From our perspective it seems highly likely that the market has moved on information which was not in the public domain. The company should have acted much quicker to respond than it actually did.
As chairman it should have been the responsibility of Rene Medori to have made sure the board acted both appropriately and quickly in response to these movements in the market. I would also hope that company have instigated in internal inquiry to investigate any possible leak - and requested their advisers to do the same.