It has been fascinating watching Sound Energy (SOU) play out over the past few years, but probably less so if you’ve actually been invested in it!
A couple of weeks ago I covered Sound Energy (SOU) and its recent disappointing drill results which appeared to cement its fall from grace as a favourite amongst private investors. At the time the share price was around 8.7p and I mentioned the fact that some of the placees from the recent equity fundraising of $2.7 million net at 10p would likely be looking to try and create a spike to sell into. Since then I have seen all sorts of rumours on social media, including one that a single shareholder took £3 million of placing shares – which is more than were actually issued!
Sound Energy (SOU) has proved to be a great example of why private investors shouldn’t get too far ahead of themselves and start ordering a new Ferrari, based purely on early results in any company drilling for oil and gas.
I warned folks time and time again that the valuation of Sound Energy (SOU) was a monumental joke as the shares were pumped up to a peak of 82p. But the savants of the Bulletin Board Moron community knew better and hurled back abuse. Today the shares are just 11.62p but that is still way too high.
Sound energy (SOU) is a company that I’ve been negative on in the past, and justifiably so considering its recent fall from grace as one of the most popular shares amongst private investors.
Do you remember when shares in Sound Energy (SOU) were 80p+ and some commentators thought they would multi-bag from there? I warned you that this was a stock built on spinning plates and that, one day, reality would cause pain and misery for shareholders. That day is today, the shares are down by 29% at just 17p. But could it get even worse? You bet it could.
I’ve been bearish on the valuation of Sound Energy (SOU) for a while now, and nothing in the updates this week on Tendrara or its final results have changed that opinion. Don’t get me wrong, I can certainly see potential in this company, and it has done well to turn things around and get to where it is currently, but I still think that it is crazy that it is trading at a market cap of well over £500 million at this point in time.
Sound Energy (SOU) has performed better than I expected in 2016 and the share price has held up at higher levels than I anticipated, yet I still think the current market valuation is totally crazy at this stage!
One of the biggest red flags of a company being ridiculously over-priced is its directors selling shares, and that certainly looks to be the case with Sound Energy (SOU) following its after hours RNS!
Sound Energy (SOU) has been one of the best performing small oil companies this year in terms of its share price, but when you take a closer look it is hard to see how it justifies anywhere remotely close to its current valuation.
Most oil and gas plays are licking their wounds from persistent energy price falls and continued gloom in many quarters about the present outlook. However, Mediterranean-focused Sound Energy (SOU), with gas interests in Italy and Morocco, is drawing comfort from a field agreement it has newly struck with Schlumberger, the multi-billion US oil and gas services giant, to develop the Tendrara onshore gas licence in north-east Morocco, where Sound is the operator.