By Cynical Bear | Wednesday 14 June 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 last wrote about Monchhichi (MCC) in February HERE when it completed its underwhelming placing of £2.1 million at the incredible price of 35p and I wondered what it was going to do next. Well, rather than actually invest its funds and generate shareholder value it is has just announced some more financial spoofery last seen at the disastrous Highlands Natural Resources (HNR), It is worth taking a closer look.
Last Thursday, Monchhichi issued an RNS entitled: Investment Warrants and Directors’ Interests. I perked up immediately as it is was always going to contain some comedic gold.
The first piece of the RNS was undoubtedly good news. The bonus warrants that had been issued free to all shareholders at 80p were being extended to the end of 2017. The 80p spoof hadn’t been sufficient to get the share price moving above that level so no harm in giving it another go.
The company clearly realised though that the 80p warrant spoof may have been getting ahead of itself; one should remember that the net asset value here is well under 10p and no new investments have yet been made. Also, it doesn’t have a lot of cash, so that leads us on to the second part of the RNS, namely the Issuance of 30 million Investment Warrants as follows:
“The Company has furthermore placed a total of 30 million assignable Investment Warrants that can convert into an equivalent number of new ordinary shares in the Company at 47.5p per share with two international investors and the Company's CEO. The upfront investment consideration per Investment Warrant is 1.0p premium for a total cash amount of £300,000. The Investment Warrants maturity date is 24 December 2017. The maturity date accelerates to 15 working days from the date Monchhichi provides notification to the Investment Warrant holder that it has entered into a binding agreement for one or more investments with a combined value of at least £40 million and with a minimum of 25% of such consideration being satisfied through the issuance of newly issued shares of the Company at a notional price of 60p per Monchhichi share or more. Should these Investment Warrants be exercised in full it would raise a total of £14.55 million in cash for the Company including the initial upfront 1.0p premium per Investment Warrant. As part of the issuance 5 million Investment Warrants have been subscribed for by Monchhichi CEO Jean Pascal Tranié.”
Well they say imitation is the sincerest form of flattery; well, I trust that the Highlands Natural crew are feeling flattered as this is straight out of its playbook. Readers will recall that Highlands Natural joined the Sub-Standard List with limited cash but bought some rubbish for 30 million warrants at 25p that, once the share price was ramped mercilessly above that level, were sold to an “institutional investor” or flipped into the market depending on which version of the truth you go for and as a result, the company raised £7.5 million out of thin air. The fact that it is slowly pissing this away on pipedreams most notably in East Denver is neither here nor there, it raised the money and Monchhichi obviously wants a bit of that.
Its warrants are priced at 47.5p which would raise £14.55 million if all exercised which would make up for the pitiful sum of £2.1 million raised in the placing earlier this year.
The RNS is just ramping fodder through and through really. The extension of the 80p warrants; new 47.5p warrants; and talk of shares being issued as part of a deal at 60p. I smiled to myself that the investor base here is clearly totally non-plussed as the share price has hardly budged at 34p but this is indicative of an absolute ramp-fest ahead.
A slight side-note, I see that the CEO has acquired 5 million of these warrants for £50,000. I’m all for alignment of interests but he could have bought shares in the market with that money. If these warrants get flipped at 60p say following an acquisition announcement, he would make a quick £575,000 profit. Nice work if you can get it.
Why buy shares in the company like your lowly investors and merely double your money when you can ten-bag!
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