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Change is coming at New World Oil & Gas

By Ben Turney | Monday 31 August 2015


Disclosure: I own shares in one or more of the stocks 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.


Over the last six weeks the New World Oil & Gas (NEW) shareholder action group, NWOGaction, has been quietly laying the foundation for a most surprising turn of events. Where the market has given up hope, thirty-seven private shareholders have continued fighting for their company’s future. Their efforts are about to bear fruit.

As the forward selling controversy reached its climax, most in the market missed the fact that New World is scheduled to hold an AGM by the end of October. NWOGaction did not miss this.

Two crucial events will happen at the AGM. First, at least one (though probably two) of the company’s directors will be up for re-election to the board. Second, members of the company (shareholders, whose names appear on the shareholder register) can nominate as many candidates for election to the board as they wish.

While many commentators have questioned the ability of the shareholder action group to rematerialize enough of its holding to call an EGM, the fact is this isn’t necessary. Such is the depth of feeling towards the current board of directors it is inconceivable that the director or directors standing for re-election will face anything other than resounding defeat. At the same time, so long as the action group nominates credible alternatives, it is highly likely shareholders will vote for anyone to join the board if they offer hope of doing something constructive with the company’s cash pile.

The irony of the manner in which the board constructed the open offer is that it sealed its fate. By not participating, the directors allowed themselves to be diluted by c.85%, thus stripping themselves of crucial support, immediately before an AGM, in which a significant number of well-organised shareholders are highly motivated to participate.

As bitter a pill to swallow as the open offer was, it has left New World in an unexpectedly strong position. So long as a credible new management team is able to slip seamlessly into the company, this listed-vehicle has funds and, perhaps more importantly, investor awareness. At the moment that awareness is deeply negative, but that could all change very quickly-

The first factor that could start to shift market sentiment is the realisation that New World’s CEO, Peter Sztyk, must stand for re-election. Based on director rotation at previous AGMs Mr Sztyk now faces shareholder justice. The company has arranged a conference call for 17 September, at which the board hopes to lay out its plan for New World. Perhaps Mr Sztyk believes he will be able to persuade his shareholders to forget the failure, humiliation and gross over-expenditure of the last four and a half years. If he does believe this, he will quickly find he is alone. 

I met privately with New World’s board at the start of August. Although I promised not to reveal what was discussed, in subsequent communication I’ve had, I believe the directors recognise the situation they now find themselves in. NWOGaction has been vocally advocating for an AGM to be held as quickly as possible and I believe this message has sunk in.

In short, New World’s board’s days are numbered. There is nothing the directors can do about this. The only viable option they have is to hand over the reins to a credible new executive team in a dignified manner. Pursuing any other course of action will simply inflict unacceptable collateral damage on reputations, careers and the company.

Over the last six weeks, New World’s shareholders have shown remarkable resilience and a great deal of restraint. It really is time to put the conflict of recent months to rest and allow the reformed company to heal its wounds and start a new lease of life under new credible management. 

For the avoidance of doubt, I am not going to put myself forward as a director at the AGM. It will be vital that the reformed New World has an independent shareholder representative on the board, but I am not the right person for this job. NWOGaction has other candidates in mind


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Comments

8 comments

  1. I hear Dan Levi is at a loose end…

  2. Ben, In the disclosure at the top it’s says you hold no position in this stock?

  3. @Mark – sorry my mistake. I’ve corrected the disclosure. I am both a holder of New World and also a member of the company.


  4. DUCK AND DIVE

    Bravo, Ben. I hope the AGM signals the start of happier times for NEW’s much abused shareholders.

    Methinks AIM’s 20th anniversary will mark a big upsurge in shareholder activism so maybe ShareProphets could publish an Idiot’s Guide since most angry/frustrated PIs don’t have a clue?

    For PIs who want to do more than moan, this is a compulsory read:
    http://www.sharesoc.org/Guaranteed_Votes.pdf

    And I think ShareProphets should be lobbying the big stockbrokers to offer Crest Personal Membership online trading accounts so as to enable all PIs who prefer to trade electronically to benefit from the advantages that come from being added to a PLC’s shareholder register:
    http://crestaccounts.co.uk/crest-personal-member-accounts-explained/what-are-the-advantages-of-crest-personal-membership

    In fact, fewer and fewer brokers are offering this service since it suits them, administratively and financially, to corral disenfranchised PIs into nominee accounts.

  5. D&D
    Where there is a desire to be active it’s quite possible to hold just one or two, ten or twenty or perhaps a couple of hundred shares in certificated form while continuing to make use of SIPP and ISA nominee accounts (at some risk of disenfranchisement of course- see Ben’s earlier stories relating to pooled nominee accounts). It doesn’t cost very much to certificate compared to travel costs to AGMs in exotic places with foreign sounding names. I’m thinking of St Helier with that one.

  6. GheeBhee, I was thinking more about gathering enough PI votes to lodge a GM requisition or table resolutions.

  7. Ben; The interims today state the £2.8m cash. And they seem to have spent jackshit on projects and wages during interims and since so how come if you deduct receivables+cash off payables at end of interims and add new cash from placing, how come they only got 2.8m. Ie $160.000 net payables call it £105,000 take off the £3.5 m placing you left with just under £3.4m and see stated cash where the £600 grand gone surely not all on placing fees? Have they really spent that in two months……obviously some will be on exchange rate and operating fees but maths don’t seem right!!

  8. Speaking of GMs, given the huge volumes traded AFTER the SP had increased massively, if the MC has fallen below half the issued share capital would they not be compelled to convene a GM to discuss this specifically anyway or would regulatory requirements be satisfied by the AGM? Sorry if I’m talking bollox.


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