By Nigel Somerville, the Deputy Sheriff of AIM | Friday 12 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.
Under its Bracknor death-spiral funding package, AIM-listed Advanced Oncotherapy (AVO) has to call an EGM proposing resolutions to drop the current nominal, or “par”, 25p price of its shares by at least half in the event of 10 consecutive closes below 110% of nominal (ie below 27.5p). But the company has never defined the closing price used: is it mid-price, bid-price, offer-price at close, or perhaps some more convoluted closing daily VWAP (volume weighted average price) calculation? But one thing is for sure, the match is right next to the blue touch-paper. Is it today or Monday, fellas?
With Bracknor currently lobster-potted on something like £2.5 million of loan notes which it can’t convert (because the conversion terms would result in the issue of shares at below nominal – something one is not allowed to do), one would imagine that there is a certain enthusiasm for getting a capital reorganisation over with quickly from that direction.
But of course it would be a major embarrassment for the company, whose shares have – entirely predictably - tanked since the announcement of the Bracknor deal, and with the company only having got shareholder authorities adequate to convert the Bracknor loan notes at an average of 44p (and the associated warrants at 57p), with the current average conversion price sitting at below 30p just over half way through converting tranche 1 (of up to 19) of loan notes, questions might be raised there too.
On Friday 28 April the shares closed at 27.5p mid on the nose. Thus the closing bid was below 27.5p. Since then the shares have closed below 27.5p mid every day, including yesterday. So if the 27.5p 10-day trigger is based on the closing bid price and the shares close with the bid sitting below that figure today then an EGM is triggered. If the trigger was based on closing mid-price then we need a mid-price close below 27.5p today and Monday to trigger an EGM.
Which is it? Or is it some other measure?
Perhaps the company would care to clarify this important little point because some people might wonder whether dropping Nominal by at least half would simply serve to offer Bracknor a new target price to sell towards. Those people might be a little reluctant to pick up their “golden tickets” even if Advanced’s own directors have been desperately buying (with yet another NED taking one for the team as announced yesterday morning) as the shares have slipped and slipped some more.
And while we are at it, under what circumstances can Bracknor refuse to hand over any more cash? Does that affect the company’s financial security?
But one thing I am not questioning is that the shares remain a SELL – even if Tom Winnifrith owns one single share. He, by the way, is champing at the bit to get another chance to turn up to an Advanced general meeting and pose a few tricky questions and compare the size of his gym membership bill with that of the company’s.
After massive spoofing by directors the shares are now 25p-26.5p. That notice of another EGM - which will cause the shares to crash - may well be needed by Monday at 7 AM. Another reason to bail today.
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