By Nigel Somerville, the Deputy Sheriff of AIM | Wednesday 3 May 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.
Oh dear. Oh dearie me. AIM-listed Advanced Oncotherapy (AVO) has released a TR-1 from institutional investor Aviva showing that it has been dumping shares and went below the disclosable threshold to 2.44% last Friday in terms of its directly held interests. It had a further 0.66% interest via loaned out shares. Meanwhile Advanced Onco shares today fell below the 25p nominal price of its confetti, leaving death-spiral funder Bracknor in a bit of a pickle just five days after ponying up tranche 2 of convertible loans which it can’t convert for less than 25p. Ouch.
The shares, last seen – on a spread of 24-25p - are 24.5p mid.
The rules of the game are that companies cannot issue shares at below the nominal price – 25p in the case of Advanced. So if conversion shares are to be issued to Bracknor, they have to be handed out at 25p or above.
The conversion terms are that upon notice, tranches of loan notes are converted at the lowest daily volume-weighted average price clocked up over the previous 15 days. By my maths, last seen, today’s average trade price (weighted by volume) sits at the tiniest fraction above 25p by just four one thousandths of a penny.
Will the dam burst today?
If so, Bracknor won’t be able to convert any more shares unless and until either the conversion terms are altered (perhaps a higher conversion price but more fee shares in compensation), Advanced is forced to drop its nominal share price – which would take an EGM – or the shares scrape back over that 25p mark and stay there for 15 days.
Bracknor’s get-out is that it call trigger an EGM if the shares close below 110% of nominal (ie 27.5p) for ten consecutive days – although what closing price (mid, bid, offer or some other more convoluted measure) has never been disclosed. But you can bet your boots that a close at 24.5p mid will count!
Bracknor is not a charity. If it needs to force an EGM in order to convert and dump the resulting shares so that it can get its cash back then one would imagine that it will do just that. And then it will just carry on dumping and dumping until the music stops for whatever reason (another breach of Nominal?)
You have been warned repeatedly on this site: Bracknor isn’t in this game to build a great big stash of golden tickets in Advanced Onco, Bracknor is lending cash out on 5% commission, charging interest and then charging 3% commission to convert into shares which it can then dump.
With careful handling, it will convert on the lows and sell on the highs, but with a c. £0.7m head start from commitment fees etc, even if Bracknor sell conversion shares at a loss it can quite easily come out ahead.
Unless it is prevented from doing so by the shares trading below nominal.
That EGM only seems to be a matter of time now. We’ve had multiple director buys, a spoof posting on the Advanced Onco website suggesting that Bracknor was a buyer, paid-for research, investor briefings (which went down like a lead balloon) – and STILL the shares have been falling.
Advanced, in my view, remains a nailed-on sell – the shares are headed only one way.
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