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Sell Picks of 2017 review part 1: Challenger Acquisitions the plug hole beckons

By Cynical Bear | Monday 9 January 2017

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.

I appreciate we’re only a week into the New Year but as there’s been significant news on both my sell picks, here’s a quick update. You won’t be surprised to hear that I remain as confident as ever as the position has worsened for both already. Let's start with Challenger Acquisitions (CHAL).

As Tom noted in Friday’s article, the Chairman, John Le Poidevin, has “retired” with immediate effect and Mark Gustafson, CEO, will take on the role for the time being.

Just a couple of additional observations from me. It was interesting to see the frank admission behind the retirement, namely the slow progress on the contracts. This doesn’t bode well generally for the business but it was rather an odd admission and it got me thinking about what wasn’t being said.

Why do NED’s at the lower end of AIM or the Standard List of the Main Market really ever resign, sorry I mean "retire"?

Either they’re too busy elsewhere (rarely) or, more commonly, they’re no longer being paid and/or worried about their own reputation and/or worried about the solvency of the business which can lead to personal liability.

Clearly, John didn’t mention any of those more common reasons explicitly but I am left wondering whether the sad admission that he was stepping down as the business was struggling was actually a “positive” cover for the real reasons.

In addition, John was bought on board to help with the financing and the fact he’s gone can’t bode well bearing in mind that Challenger needs to find €625,000 for the ex-Starneth vendors by the end of this week. The most likely outcome is a further extension but that would only be prolonging the inevitable.

I would be amazed if this survived in its current form into H2 2017 with all the convertible notes that fall due in H1; however, in the short-term, I see the share price moving into single digits this week and not ever recovering.

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