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Punters Get Punished in Tern - I stay short

By Lucian Miers | Monday 31 October 2016

Disclosure: The author has a short position in one or more of the shares 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.

As a rule, as I have pointed out before, the stocks most talked about on bulletin boards make appalling investments. Gulf Keystone (GKP) is a good example of this and Tern (TERN) the pretender to the Gulf throne is also a case in point.

Tern also illustrates the danger to the retail investor of holding on to a cash strapped AIM company. One morning he wakes up to find a placing has been done behind his back to a few city flippers at a huge discount to the share price and the share price tanks by the amount of that discount, in the case of Tern recently, that was 40%.

What makes it worse was that the majority of the placing proceeds (£2 million) were squandered on increasing its stake in its “flagship” investment Device Authority by a measly 4.5% to 56.9%. This ridiculous waste of money has the effect of “revaluing” its stake from £6.1 million in April to £25 million This is a conjuring trick that Quindell’s Rob Terry would have been proud of.

A few months ago this would have given the retail following an excuse to bid the stock up to 25p to match the market cap with the “value” of the stake, but the market seems to be tiring of these shenanigans.

There is no evidence to me that Device Authority which is loss making on miniscule sales and has no assets is anything more than hot air and at 9.5p the shares are still wildly overvalued. I am short.

This article first appeared on the Nifty Fifty website which Lucian Miers runs with Tom Winnifrith & Steve Moore. To access the website ahead of the next share tip from Tom & Steve and ahead of a new shorting idea from Lucian GO HERE

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