By Tom Winnifrith, The Sheriff of AIM | Thursday 21 January 2016
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Before Christmas shares in Avanti Communications (AVN) traded at c200p. This morning they touched 100p although they now trade at 117p. What on earth is going on? The only news from Avanti's CEO, the uber-Welsh king of the bombasts David Williams is that he will be presenting interims on 4 February. However it is not just the shares that are tanking, so too are its bonds, they are now officially uber junk and as such five massive questions need to be answered by the company with the numbers. For what it is worth my target price remains - as per Gold & Bears see HERE - 0p.
1. Why are the bonds collapsing? Before Christmas the yield was 14% which is already well into junk bond territory. It is now 21%+ and rising. This indicates that the equity is worthless. Given that junk bond firms are shutting by the day is Avanti aware if any of its investors are in trouble and being forced to liquidate?
2. I am fairly sure that Avanti will run out of cash this summer. If the junk bond route is closed to it how does it plan to secure additional funding? How will it refinance existing junk bonds when they come up for redemption in 2019 if it is still around at that point, which I doubt?
3. Is Avanti making any money from the evil Islamofascist butchers of ISIS?
4.Has it yet been contacted by my good friends at the Financial Reporting Council regarding its incredibly misleading June 2015 accounts?
5. Have there been any discussions with bond holders regarding a debt for equity swap given the fact that Avanti is drowning in debt?
Avanti has been asked these questions before but appears unwilling to answer them. Perhaps if any analysts bother to turn up to its results day presentation they might put bombast Williams on the spot.
The bond price tells you everything you need to know. The equity is worthless and so my target price remains - as per Gold & Bears HERE - 0p.
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