By Tom Winnifrith, The Sheriff of AIM | Saturday 22 October 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.
Equities First Holdings is back. You remember those chaps who "borrowed" shares from folks like Andrew Austin at IGAS, fraudster Rob Terry at Quindell (QPP) and Ronald Duncan at Cloudbuy (CBUY). Shares in all three companies crashed and all defaulted on the loans so completing what was in effect a hidden share sale. After almost two years the disgraced shysters of EFH are back and this time it is Edi Truell of Tungsten (TUNG) infamy who is dumping shares but wants to hide the fact.
Last week it was announced that Edi's vehicle Disruptive Capital Investments Limited (DCIL) had loaned EFH 6 million shares. Edi retains 11,451,988 shares. So in effect he has sold 1/3 of his holding.
The loan is not repayable for 2 years. Edi will have received an advance of c65% of the face value of the shares. The stock trades at 63p so he will have netted c47p per share so call that c£2.8 million. There is no way he could have realised that by dumping his shares on the open market.
The shares have now gone to AFH as what Edi describes as "collateral" but we know from prior EFH loans that it simply sells the lot and will already have done so. The statement from crazy Edi reads:
DCIL's interests remain aligned with those of other shareholders and the EFH arrangement is such that DCIL remains fully financially and economically exposed to Tungsten's share price. Whilst DCIL has transferred title to the shares for the period of the facility, EFH have warranted that they will refrain from short selling and will not exercise any voting or other such consensual rights or powers under the terms of the agreement. Strategic voting rights will be exercised in collaboration with DCIL.
Sure EFH won't short sell. It just sells the shares to which it now has title (i.e. reduces its long) so it is no surprise that it will not be voting the shares at the next AGM. Neither will Edi as they will be owned by someone else.
At some stage Edi will default on the terms of the loan. That is what happened before in EVERY CASE. The shares dip below something like 57p and it is a technical default. Edi gets to keep his cash and everyone is happy. The idea that DCIL's interests remain aligned with other shareholders is true in respect of the shares it retains but patently not true in respect of the ones it has effectively sold.
There was a compelling bear case for Tungsten beforehand as Lucian Miers explains HERE.
EFH is the kiss of death - this is now a slam dunk short.
If you have forgotten the EFH stink from last time around check out our coverage HERE
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