By Nigel Somerville, the Deputy Sheriff of AIM | Thursday 8 December 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.
At the new no-one-is-watching o’clock of lunch-time yesterday, ShareProphets AIM-China Filthy Forty play All Asia Asset Capital (AAA) announced that it had received £100,000 in the form of a convertible keep-the-lights-on loan from an entity controlled by an un-named shareholder. One assumes that it must be a very small shareholder as there was no Related Party Transaction statement, but the terms suggest that the company is in a spot of bother. Er, actually a serious spot of bother.
This one has rather slipped under the Filthy Forty radar. One can only apologise for the oversight, but as the ever-contracting number of the original 40 reduces (we are already down to just 17) I guess the spotlight can be better shone on the few remaining members of our inillustrious index.
All Asia first came to the Casino in May 2013 at 3p per share, registered a high point of 31.5p that October and it has been downhill all the way since then. It last raised money from a placing at 16.5p a share in April of last year. With the shares now at 12p mid (as at yesterday’s close) it is still well up on the IPO, but yesterday’s loan – which is convertible – looks set to see the shares head back from whence they came.
A peek back at the company’s interims to June of this year (released in mid-September) sees net current assets sitting at just £58,635. In other words, in order to keep the lights on All Asia has had to get some cash in the coffers pronto – hence yesterday’s funding package.
The terms – such as they are disclosed at all - are grim. The unsecured £100,000 loan is on an annual interest rate of a somewhat penal 15%. We are told that this is to be paid on an annual basis until full repayment but we are not told the term of the loan. Nor are we told who the shareholder behind the lender, Nature Cove Holdings, actually is.
We are told that the loan and accrued interest are to be convertible at any time at the option of the lender into new ordinary shares at any time during the (unspecified) term of the loan, but also in (unspecified) circumstances of default.
So what are the conversion terms, with the shares closing last night at 12p mid? Er….the lower of 3p or the prevailing share price at time of conversion (and even then there is no definition of that – are we talking mid-price, bid-price, some kind of volume-weighted price calculation…..?)
The company, as at last night’s close, sported a market capitalisation (according to ADVFN) of some £25.4 million. If this lender decided, after racking up a year’s worth of 15% interest, to convert at 3p it would (at yesterday’s closing mid-price) be getting 3,833,333 shares (including interest) which are currently worth £460,000. For a £100,000 loan.
On an annualised basis, then, we get a cost of 360%. Is this, then, the new most expensive loan in AIM history?
Two words might spring to mind: death and spiral.
Accordingly, just one word springs to my mind….SELL - target price (at best): 3p
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