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African Potash - the most expensive loan in AIM history (from the FD's wife)

By Tom Winnifrith | Wednesday 2 December 2015


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.


Our scepticism about overhyped African Potash (AFPO) just moved up a notch as it has borrowed £750,000 from the Mrs of the FD in what must be one of the expensive loans in history.

Katrina Clayton will pick up a £60,000 arrangement fee on day 1. Then earn interest at 1.5% per month over the nine months of the loan.That is another £99,375. So in all she will get £159,375 back over nine months. That is an annualised rate of 28.33%. African would have paid less if it had borrowed the cash on its credit card.

Surely it would have been better to do a small placing? Well maybe not becuase who would have backed such a placing when African happily admits:

The Bridge Loan will provide funding to the Company to bridge its short term working capital requirements for the next 3 months. If the Company is not able to generate sufficient cash-flows from its trading operations after that three month period to cover its ongoing working capital requirements, then further funding will be required.

In other words this cash wil last for just 12 weeks at which point there will have to be a, no-doubt heavily discounted, confetti issue in order to keep the lights on. And by the way should the next placing be for £1.5 million or more then the loan plus any outstanding interest, in order words if the next cash call raises £1.5 million that will simply buy an additional three months.

At 1.8p valued at £14 million this is company in dire straights and its shares are a sell.


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More on AFPO


Comments

4 comments


  1. Simple Moving Avarice

    What amused me was this part of the RNS

    This bridge funding enables us to continue to make progress in the transformation of our business and illustrates the faith and commitment of senior management and their families to this project

    because from the terms in the rest of the RNS you could be forgiven for thinking that Mrs Clayton, wife of the FD, does not in fact trust them further than she can throw them.

  2. OInk …..Oink ………… snuffle ……truffle …………….oink …..oink

    Nice work if you can get it . Beats Warren B returns by doing sweet F.A We wont ask where she got the 750k from in the first place , cos we all keep small change like that handy from selling our “directors incentive scheme” shares . The rewards of capital before the capital has been made ! Share holders …….. get your retaliation in early and sell .

    For the record I am not a current holder .

  3. Wildrides,
    This is one that I have been totally wrong about in terms of what the SP has done, but so far I’ve still seen nothing to really change my negative view of the fundamentals. Especially as so far the company has failed to deliver on its targets – I remember a further big rise when an RNS came heralding first sale within 60 days (long since gone with no sale in sight!).
    Sure a lot made good money here – but there will also be plenty sat on heavy losses who believed all the hype and bought in after a 1000% rise! Largely their own fault of course for failing to do any research, but just shows that these crazy pumps can end up costing some a lot of money!

  4. What a disgrace! How can this possibly be acting in the best interests of shareholders?


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