By Tom Winnifrith, The Sheriff of AIM | Saturday 11 February 2017
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.
I am still boondoggled by the way that Avanti Communications (AVN) managed to get a refinancing away. You will remember that the cash guzzling satellites business which misses every operational target going was set to run out of what little cash it had left. Amazingly it persuaded its bond holders to agree to accept stacks of interest on its bonds in new ( equally worthless) bonds. And it got the institutional mugs to sign up for more bonds.
Throwing good money after bad is pretty crazy but at least you would have expected the bind holders to wipe out the equity in return for their support. Heck they held all the aces they could have demanded what they wanted. But that did not happen, shareholders were not diluted at all. Bonkers!
Perhaps it was that the largest bond-holder, the clowns at Mast Capital was also a major equity holder. Any more conflict of interest with your tea vicar?
So the deal stank to high heaven but it only kicks the can down the road. Margins in this industry are still cratering. Avanti will still fail to hit any targets or generate cash. In due course the shares will just dwindle to zero. That would be 140p less than the supposed bid that fake news outfit the Financial Times invented last Autumn.
But look at the bonds my friends for the real story. S&P has just downgraded its rating on the Avanti debt Avanti from CC (Serious risk of default) to D (Effectively in default.) To those who listened to the UK Investor 2016 Presentation from the bears this will come as no surprise.
If the bonds are sub junk, the shares are truly worthless. Keep selling. Target price 0p
For what it is worth, at UK Investor Show 2017 on April 1 there will be two bear sessions. First up are myself and Evil Knievil. Then there will be myself, Lucian Miers, Matt Earl, Graham Neary and the Globo destroyer Gabriel Grego. Last year we took Avanti apart in detail, this year we have TWO well known UK stocks in the crosshairs. More details are at www.UKInvestorShow.com
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