Sharecrazy29 Oct 2011 00:27
http://sharecrazy.com/beta/category/UK-Analyst/
Part of the function of a Stock Exchange is to allow an orderly market in the buying and selling of shares. For a quoted company’s shares to be traded in an orderly manner, there surely must be a minimum float held by non-insiders. This is a principle that has been grasped by exchanges from Vancouver to Mongolia which have rules on the subject, but sadly not by our own LSE owned AIM.
AIM leaves this important matter in the hands of the Nominated Adviser who is “responsible to the Exchange for assessing the appropriateness of an applicant for AIM.” This vagueness and lack of a simple ruling on the subject has been the reason behind countless AIM fiascos from Knutsford (remember that one?) White Nile, DEO, about which I wrote in January of last year. Its shares are down 90% after a 200 for 1 consolidation.
Now we have Dongfang Shipbuilding (Group) Company Ltd (DFS) , a Singaporean enterprise which builds ships in China and was introduced onto AIM by NOMAD Northland Capital Partners on the 12th August with a market cap of £38 million. Less than 3 months later the market cap is £256 million as the shares have soared from 20p to 136p. Have the company’s fortunes improved that much in 3 months? Not a bit of it. Of the five announcements made since flotation, the interims, released in September, show losses increasing from $1.7 million to $3.6 million as shipbuilding revenue plunged 24%. In fact with short term borrowings of $173 million and unrestricted cash of $7 million the company’s finances look appalling and its future dependent on its bankers.
The company’s founder CEO and 72% shareholder Mr Chen Tongkao owes the company some $74 million, an asset on the balance sheet which appears to be secured by his shareholding in the company (how crazy is that?) Two other directors, the chairman Mr Narayanaswamy and Mr Ismail, the finance director (who is based in the UK which seems odd given that DFS is a Singaporean Company based in China) both have holdings of 5.5 million shares, “worth” around £7.5 million each. They were issued in lieu of payment for services billed at $252,685. Ie they were issued shares this year at 2.2p, so are each sitting on a sixty bagger in ten months.
The only other two announcements of any consequence since floatation show that on 27th September £1.8 million was raised from an unnamed single investor at 38p and that a week later on 4th October the company “knows of no specific reason” for the shareprice rise.
Well here is a specific reason. Apart from the directors who hold 75% of the stock , the rest is held by connected parties from Singapore who were in before the introduction to AIM. There is no free float and the shares have lost all touch with reality for this reason.
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