The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
They built up the position in July this year, so they have lost a lot already. Closing out their position would require around 10-15x the average daily bought value. And they may be forced to do it soon if they haven't already...
It's also not a very big short position. I think whatever the analysis, almost all hedge funds probably would stay clear of this company, seeing as the market capital is not so big and there is a large retracement from the maximum. Has the potential to put a massive squeeze on them if it increases.
For the information of people who are unfamiliar with shorting (I don't like it personally but you are always going to have people making complex instruments so it's never going away), to maintain a short position means you have to have constantly the amount of assets to cover it, even if you have not closed it out. Which means that just having the short position open can at the very least take away a shorter's freedom to make other investments.
There was a saying I heard long ago for those that were shorting Tesla when they were burning money: "The market can remain irrational longer than you can remain solvent"
On the whole I like it. The EU clawback is probably related to some modified milestones in a grant agreement (having been involved in Horizon EU projects, the auditors are really starting to pursue these kinds of things more). I think in the end they will end up paying it but it's not so relevant IMHO.
When I initially read the news about the sale of ATES, I thought it was yet again about selling the family silver to keep afloat.
However, that was a good open RNS, with details about ATES profit (400k pre-tax), the sale amount (1m), and the minority holding in Proteus (21%). Note the holding is in Proteus, not ATES so safe to assume Proteus is worth quite a bit more. Also the strategic reasoning in the RNS is welcome. Given the whole mess of Uskmouth, re-deploying Meygen turbines, and collaborations in Japan, the technology is mature enough to be deployed. Let others do R&D, much better to focus on the development and letting revenue from Meygen flow in.
@Earl, since you like a good copy paste:
@Earl. Of that 73m loss, 63m is impairment losses and depreciation of assets. Essentially drawing a line under the Uksmouth conversion. They got 7.5m in revenue, which is mainly due to a single turbine. They are a profit-making company with 4 in the water.
@Earl. Of that 73m loss, 63m is impairment losses and depreciation of assets. Essentially drawing a line under the Uksmouth conversion. They got 7.5m in revenue, which is mainly due to a single turbine. They are a profit-making company with 4 in the water.
From the latest RNS results, they have enough to put all 4 1.5MW turbines in the water. This plus money from the batteries at Uksmouth (+ potentially next stages of the project in Japan) mean for me the whole "pricing for bankruptcy" thesis is blown out of the water. This re-rate deserves to go to the teens, we're still at 16million market capital, which is insane (even with the big loss that they last reported from the Uksmouth conversion write-down and the debenture). Compared with another green stock like ITM, SAE has the same ballpark revenue and revenue prospects (IMO) but a market cap that is essentially 1% of ITM's.
For those interested the 7GWh in 2021/2022 that they mentioned in the RNS would be worth 1.25million at 178.54 per MWh. Assuming each turbine on average gives half the maximum power per day: 28MW * 0.5 (efficiency) * 365 days * 24 hours * 178.54 = 21.9 million per year.
I see also on the same website that Nova has money to put their own 100KW turbines in the same location:
https://www.offshore-energy.biz/nova-innovation-bags-uk-funding-for-7mw-tidal-energy-scheme-in-indonesia/
The deferred payment is highly likely due to the turbines being put back in the water. 2021 had effectively a single turbine. Now there are 2 in with plans for the next 2 to be put in the next 9 months (the third may already be in). In the annual report and the RNS releases you can see that the money they do have is largely earmarked for subcontractors to deploy the turbines. If they paid the interest now, they would have to delay the turbine deployments putting the company at risk. So the debtors accept fair terms, they get paid a few months later and the repayment of the debenture is more secure:
"The MeyGen site currently has 2 of the 4 turbines fully operational, it is important to recognise that the project has generated 43GWh of renewable power to date, and 7GWh in 2021/22. To put this achievement in context, this represents 60% of worldwide generation from tidal energy. We are proud that we remain the leaders in tidal stream technology and want to build on this to ensure we remain in that position."
"Power sales from the Meygen tidal power project were £1.6 million, a drop of £0.9 million from 2020 reflecting the turbine outages during the year." - From a single turbine. They have the money to deploy all 4 turbines. So £6m in future revenue - only from MeyGen - makes an 8m market cap very oversold IMHO.
The annual statement from 2021 is a nice way to put a lot of the bad news behind them. I think with more turbines in the water, Meygen upgrades edging closer and Uksmouth having more crystalised plans, the 8m market cap is very much oversold. With the company actually generating revenue, this could pop very fast. the bought versus sold value yesterday was very telling.
I think that price target comes from an old analysis from last year when they were looking at the value of Uksmouth if it went ahead. With placings and changes of plan, that is no longer relevant.
FYI I think this has the potential to be much higher than that, but the reasoning for that particular number is out of date IMHO.