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Gulf Keystone PLC More Retail Madness - sell
By Lucian Miers | Saturday 30 July 2016
Disclosure: The author has a short position in one or more of the shares mentioned. 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.
When I last wrote about Gulf Keystone (GKP) I said it would be my final word on the subject but that was before Friday’s news of a $300 million bid from the Norwegian Oil company DNO, the details of which are on its website.
The bid is for company after its restructuring. That is for the 22.9bn shares that will be in issue shortly. It equates to 1.3 US cents (1p) per share in a mixture of cash and DNO paper. At 4.6p per share now the shares are currently implying a post restructuring price 2p for shareholders who take up their full entitlement in the open offer. (20 new shares at 0.82p for every nine old)
This is double the value of the bid and is clearly crazy. Ever the optimists the retail army are betting that the likes of Genel will enter the fray and the eventual take out price will be $600mn.
The party that matters here is the former guaranteed bondholder interest which now represents 66% of the equity. Having already extracted a very good deal in the restructuring at the expense of the convertible note holders (by getting GKP shares at .82p worth all of what they were owed as opposed to a 15% recovery of face value for the latter) they are today being offered the chance of an exit at a 20% profit in a mixture of cash and shares in a large and liquid company, thus removing the need to dump unwanted Gulf shares on the market at way below the .82p cost price.
This represents a great deal for them and one which has probably already been enthusiastically accepted. Any “sweetener” by DNO is unnecessary and likely to be confined to the cash/share mix (currently 40/60) and the prospect of a bidding war with Genel or anyone else on the scale suggested by the share price at 4.6p is extremely remote. The shares remain a compelling sell.
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