Disclosure: The author has a short position in one or more of the shares mentioned. 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.
It looks like the game may soon be up for UK-listed, American oil stock promotion Highlands Natural Resources (HNR). In its prelims, announced last week, the company stated that it needs to raise funds either by issuing equity or third-party participation in its East Denver project.
The problem for Highlands is that the East Denver project, along with its other two “assets”, a farcical Helium play in Montana and DT Ultravert, fracking technology that has been around for years and which was flogged to the company by its own management in a dubious related-party transaction, are extremely unlikely to bear any kind of scrutiny from the due diligence team of even the most block-headed professional investor.
That leaves a discounted placing with the UK retail investor or worse still, death spiral financing, the option of last resort. Jo retail has been fleeced once already in a ramp orchestrated last year which enabled a load of warrants to be exercised, raising over $7 million for the company and allowing insiders to cash out.
The fickle mob (and the $7 million) moved on however (quite a few to Cloudtag, as it happens) and the bulletin boards have gone relatively quiet. Indeed, the main poster on ADVFN, superg1, clearly an expert on the Colorado oil industry, demonstrates with clarity and persuasion how the potential of the Denver assets has been massively over-hyped.
In a move much loved by charlatan resource stocks, last week Highlands offered up an alternative valuation to its assets to that conferred by the stock market. The very first bullet point at the start of the prelims claims its latest two assets are;
“Independently valued with combined valuation range of US$441.8 million to US$600.1 million”
Highlands’ shares have now breached 20p on their downward trajectory. At 17.5p, the market cap is £12.5 million. I don’t believe it is worth anything like this and the shares are headed for single digits in short order. Sell.
This article first appeared on the Nifty Fifty website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tip from Tom & Steve shortly and a new shorting piece from Lucian later this week click HERE
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