By Ben Turney | Friday 11 September 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.
This morning NWOGaction, the shareholder action group for New World Oil & Gas (NEW), announced its support for Adam Reynolds and his team’s bid for election to the board, at the forthcoming AGM. This is an exciting turn of events for New World’s long-suffering shareholders. It promises to set this stricken company on a much more positive path, led by the value creating force behind the recent flyaway successes of Optibiotix (OPTI) and Premaitha Health (NIPT). Reynolds and his experienced team of turnaround specialists have identified a project and new executive management for New World, in the booming Med Tech space. Now all shareholders have to do is vote in favour of this radical change in direction.
Although New World has not announced the date of its AGM yet, Reynolds and his team have been nominated to stand for election to the board. Under the company’s memorandum and articles of association, members of the company (shareholders whose names appear on the shareholder register), are permitted to nominate as many directors for election to the board as they wish. They may do this 42 days in advance of a general meeting.
In a slight quirk of logic, New World’s board can call an AGM only 14 days in advance of a meeting. Although it might seem like the nomination of Reynolds and his team is premature, the timing makes perfect sense. All three candidates will appear on voting papers, circulated once the AGM is announced.
When the inevitable election comes around, at least two of New World’s current directors are required to stand for re-election. Unless they can pull off a Lazarus-style miracle at the company’s conference call, scheduled for 17 September, short walks off the plank beckon.
Without wishing to be too confrontational, the miserable track record of New World’s existing board is plain for all to see. Even if this bunch of directors announced they had identified the most incredible opportunity ever seen in the oil sector on AIM, who in their right mind would believe them?
The answer is no one.
And it gets worse for New World’s board.
NWOGaction has a declared holding of 11.04% in New World, but is aware of other parties, holding roughly 6.5% of the company, who have indicated they will back Reynolds and his team. With an implied 17.54% behind them, the election of Reynolds and his turnaround specialists looks a near certainty. New World’s board diluted itself by 85%, through deciding not to participate in July’s extremely controversial open offer. That the directors didn’t have enough confidence in themselves to take up their open offer allocations speaks volumes. It also sealed their fate.
But what of Reynolds, his pedigree and his plan?
Over the last 18 months, while New World’s share price has been in terminal decline, Reynolds has been carving a name for himself at Optibiotix and Premaitha Health. His involvement in both of these companies offers intriguing clues as to what might be in store for New World, if he is voted onto the board.
Starting first with Optibiotix, Reynolds joined the board of the Ceres Media shell in November 2013. This AIM-listed company was on the verge of going bust, but Reynolds led its refinancing and changed the name to Ducat Ventures (DUC). Within nine months of turning this company around, Reynolds reversed Optibiotix into it. This was the catalyst to a fivefold surge in the company’s share price. The contrast of Optibiotix’s share price compared to New World’s over the last 12 months could not be greater:
In parallel to his feats at Optibiotix, Reynolds had similar success with Premaitha Health. He joined the board of the Vialogy (VIY) shell in December 2013. Again he led a refinancing of this company and by July 2014 reversed Premaitha Health into it. Although Premaitha’s share price has pulled back from its summer highs (where it registered a 150% gain), its performance versus New World’s over the last year is also markedly different:
On such a hot run of form, Reynolds and his proven team must surely represent the best option New World’s shareholders could have dared hope for to turn the company’s fortunes around. Crucially, such are his reputation and breadth of contacts, Reynolds is perfectly positioned to act as the unifying force New World so desperately needs. After all that has happened since the spring, if anyone is going to bring together the company’s various stakeholders and heal old wounds, Reynolds is the man to do it.
There are still some obstacles to overcome. First, Alliance Trust Savings needs to sort out its accidental position in the company. Second, New World’s board needs to call the AGM. Assuming all goes to plan over the coming month or so, Reynolds and his team will be able to swoop in to clean up the shell, secure the new project and recruit new executive directors. This will take some time, but with an anticipated £2.8million or so Reynolds will have a superb foundation to work from. On a fundamental basis alone, buying New World below 0.07p now makes a great deal of sense. Underpinned by its cash position, the potential for a multiple increase in the share price is clear, so long as shareholders through their weight behind Reynolds.
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