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Gulf Keystone: one hurdle cleared, one more on Friday and then the shares will either crash or burn

By Tom Winnifrith | Tuesday 2 August 2016

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.

Shares in Gulf Keystone (GKP) could be toast by Friday but I think that incredibly unlikely. That they will crash is a racing cert after today's news. Gulf tells us that the owners of 82% of each of the two classes of bonds have both agreed to support the debt for equity swap. It needed just 75% support so that is in the bag. Next up..the Bulletin Board Morons.

On Friday the company's shareholders must vote on the plans. we know that a key institutional shareholder with 11% is a committed supporter. Most of the legions of morons who own this stock will now have shares worth so little that they will not bother voting. Gulf needs just a simple majority to carry the day and given that a "no" vote would see the company go into administration you would really expect this vote to go the right way.

But there is no accounting for the sheer stupidity of the common or garden Bulletin Board Moron especially when it comes to those who punt in resource stocks. Check out the Bulletin Boards and some folk think they can get a better deal while others just want to say "fuck you" to the board even if it means rogering their own portfolios in the process. So there must be a 1% chance of a no vote which means Gulf is a zero. 0p is a certainty.

If the vote is yes then bond holders owning 65% of the enlarged equity can get all their cash back if they can sell the shares for more than a penny. If they can force the board to accept the bid from DNO (which they could do) they will get 1.1p. Pro tem they can just sell shares to the morons at a big premium to that for as long as the morons keep buying.

Gulf shares now trade at 4.08p - 4.24p and remain a slam dunk sell whatever happens.

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