Why this stock is a sell after the court hearing this week22 May 2021 09:43
I took out a modest position just before the court case as a punt, predicated on the assumption that the SOA would have to go through, as the alternative was administration in which everyone loses apart from the secured creditors.
The manner of the share suspension followed by the court case has completely changed the view I held on this, and shattered that assumption.
The way AMGO handled the hearing destroyed my confidence in management at a stroke. I was astounded by how much better a case was presented by Smith than Dicker (thanks ISA Investor!). Yet both are eminent QC's with stellar reputations. You can blame Dicker for having a bad day at the office, and for not insisting on more (he argued that the FCA had blindsided him with their timing, but that is hard to accept as a valid excuse if he were on top of the brief already). But to me the ultimate responsibility for the fact that he couldn't convincingly argue that administration is the only alternative to the SOA rests with AMGO management. They fell down on the job. And it was their only job at the time.
There has to be a very real risk that this SOA will be thrown out. In which case the losses we have already seen are just the beginning. There will probably be another trade suspension, and whether you can ever trade it again is not guaranteed. You then could put the share certificates on the wall of the smallest room in the house, if you want. Ever selling them, not so much. The money used to buy them will be gone. All gone.
It might lead to negotiations and a revamped SOA of course. But these would be less advantageous to shareholders, and the shares would tank further before recovering. In which case you could buy back in, for the ride back up, since you have the cash from the shares already sold to do so. In that scenario too, it is better to have sold.
Only if the SOA is approved will there be a good short term bounce, but long term I don't have any confidence in the management to run this business effectively now, so the wisest strategy is probably to cut and run. Make for the hills with the cash. Which won't be on the table long, as according to the Court shareholders of this wicked company are the devil incarnate.
Ask yourself, if they can't even get a slam dunk court case like this right, how can they effectively run a company with the problems AMGO has in front of it?
So I dumped the entire holding for a 25% haircut yesterday. It hurts, but I live to fight another day.
And if you guys were right to hold, and the SOA is approved and you make the big bucks good luck to you. You will have deserved it. The bigger the risk the greater the reward.
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