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I worry if I am losing my mind, but Tower Resources (TRP) is fast becoming a conviction buy for me. Yesterday the company announced the appointment of two relatively heavyweight technical directors to the board. Following on from recent institutional support, successful acquisition of the Thali Production Sharing Contract (PSC) offshore Cameroon and a flurry of insider purchase, the signs are all there that some significant is happening for this shock.
Whenever I mention Tower Resources (TRP) to anyone it’s as if I’ve asked him or her if they enjoy incest and Morris dancing. At the same time (because surely you cannot have one without the other). Tower appears to be as loathed a stock on AIM as one could imagine. With its miserable history, 6.7billion shares in issue and 0.16p share price it’s no wonder this oil & gas exploration company seems to feature at the top of most people’s bargepole lists. What could there possibly be to love?
Tower Resources (TRP) has become surprisingly interesting over the last few weeks. With a number of high profile oil exploration failures under its belt and 6.7billion shares in issue, Tower bears most of the hallmarks of your typical common or garden AIM cesspit stock. The 0.19p share price hardly inspires confidence. So, when the company came to raise £5.2million net on 15 July the market’s collective shrug of the shoulders was hardly a surprise. However, closer examination of the fundraising reveals a more intriguing story to the usual “keeping the lights on” package that has become all too familiar for small resource stocks in this market.
As far as I am aware nothing was done about Tower Resources’ (TRP) extremely controversial placement (which I warned was coming here, prior to the event, and wrote about here, after it was completed). I would be amazed if anything ever is. The AIM Investigations Team passed the buck to the FCA and the FCA just gave me their generic blah, blah about taking accusations of market abuse jolly seriously. Of course they do! After I’d finished counting regulatory flying pigs, my attention turned back to Tower’s share price and whether it could now be worth taking the gamble on a successful outcome in the high profile Welwitschia-1A (as it now is) drill campaign.
Occasionally I will break my own rule of only investing in companies where I see value in the existing assets. I’ve just done exactly that when I bought some shares in Tower Resources (TRP) at 3.8p based on my expectations that sentiment will drive the share price upwards, rather than the actual current value of the assets having much influence.
Last Friday, I predicted that Tower Resources (TRP) would place imminently. Today it did. Is this a lucky coincidence? Of course it isn’t. Time and time again I have watched share prices be pulled into the gutter before a placement is announced. On each occasion, the pattern of trade has been roughly the same. This unashamed market abuse is so endemic on AIM, that the perpetrators can barely be bothered to cover their tracks. They feel safe in the knowledge nothing will be done. However, this time could be different.
If I can spot a placement coming, based on the share price movement and some simple arithmetic, and write about it in advance (see here), with no inside knowledge, then why can’t the Financial Conduct Authority or AIM Investigations Team do something about this?
I have no inside knowledge of Tower Resources (TRP). I don’t know the brokers, I’ve never talked to the company and I’m not even sure I know anyone who owns this stock. All I have to guide me in this piece is a basic grasp of simple arithmetic, a small appreciation of commercial behaviour and a rudimentary understanding of how share prices move. So naturally I am convinced that a placement is currently in the offing!
Over the last six months the share price charts for Tower Resources (TRP) and Rockhopper (RKH) couldn’t be more different. Rockhopper is down about 45%, while Tower has gained over 600%, on an intraday basis. Over the next two articles I’ll look at the relative fortunes of these two companies and explain why one could be a buy and the other a sell.
From the perspective of the bulls it can be said that in recent months Tower Resources (TRP) has been an example of everything they would wish to see – a recovery situation that keeps on giving.
Perhaps more than anything else what gives charting a bad reputation is when what appears to be the perfect formation/pattern then goes and gives traders a slap in the face.
It may not come as much of a surprise to learn that I do not generally have a great regard for broker upgrades / downgrades.
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