By Tom Winnifrith, The Sheriff of AIM | Sunday 5 March 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.
When AIM uber dog Advanced Oncotherapy (AVO) announced that instead of going for non dilutive funding ( as no-one would provide it) it was being forced to resort to a dreadful £13 million death spiral from loan sharks Bracknor, its shares were 65p. When the death spiral started the shares were 58p. Now it just £100,000 of the death spiral loan notes on the first £1.3 million tranche converted, the shares are just 43p to sell. Bracknor now has three reasons to panic.
1. As explained here, notwithstanding the death spiral, Advanced could be trading while insolvent within weeks or days. The hapless Nomad could then push for the shares to be suspended, at which point Bracknor will not get its existing loan repaid or get the cash back by converting shares and dumping in classic death spiral fashion. Given that deadline Bracknor is going to have to accelerate its forward selling and share dumping.
2. Given how the shares have crashed from 58p to 43p to sell on just one £100,000 share dump it is now dawning on Bracknor just how illiquid Advanced is. And also that punters are not wild about a company that has repeatedly misled investors, whose entire order book has disappeared, etc etc.
So Bracknor is wondering what the share price will be after another 12 £100,000 conversions have taken place? Buttons I suggest. Another reason to crack on with shares sales. But that brings us to problem three.
3. The nominal value of the shares is 25p so Advanced cannot issue stock at below 25p. I put it to you, that within a couple more £100,000 tranches of death spiral conversion the shares will be well below 25p making it impossible for Bracknor to convert and make money. That means that Advanced needs to have a capital reconstruction which means a document, GM etc. That will take time and will also panic out weak holders in the bulletin board moron community. Bracknor knows that which is another reason to crack on ASAP with dumping stock and getting its money back ASAP on the first £1.3 million loan note.
And all of this means that even if Advanced is not insolvent within weeks its shares are set to tank. Keep selling - target price 0p
Never miss a story.
This area of the ShareProphets.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ShareProphets.com. ShareProphets.com does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ShareProphets.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ShareProphets.com and is not intended to be relied upon by users in making (or refraining from making) any investment decisions.
Comments are turned off for this article.
Search ShareProphets |
Stock market news |
Recent Comments |