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Solo shares at 0.24p worth 0.91p - really? What is a Spec Buy? Is this Corporate BS?

By Tom Winnifrith, The Sheriff of AIM | Tuesday 4 July 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.

Beaufort Securities acts as house broker to Solo Oil (SOLO) so it is paid to write research on the company. Think of the relationship as being like that as between a hooker and a punter. The punter pays the bills. The hooker assures him that he is hung like a donkey. With that minor caveat I bring you a fairly detailed note from research analyst Charles Long at Beaufort out today. Apparently the shares, now 0.24p are worth 0.91p. But Hang on Henry...

The price target has been increased from 0.84p but the stance is "speculative buy" so what does that mean? Surely given that the long run return on equities is 7% per annum but this stock is apparently fundamentally undervalued such that its shares could treble and still be cheap the stance should really be "nil fucking brainer" if Mr Long really believes his numbers?

On Beaufort's website a Speculative Buy is defined as "The stock or other security is of a speculative nature and may be issued by a smaller company. It may be illiquid, and the spreads between the bid and offer prices may be wider than those for a stock issued by a larger company. It is expected to outperform the benchmark stock market index of which it is a component by at least 12.5% over the twelve months following the date of the publication. The rationale for the recommendation may be linked to factors other than the usual determinants of share price performance, such as the possibility of development of new technology, a discovery of natural resources, or a take-over bid for the company."

I concede that the spread 0.25p-0.3p is enormous. Market Makers really are low life scum who deserve to be tried for usury and shot. They do not - as they claim, add liquidity to small caps they simply steal money from investors in a legalised fashion. Buy surely for all this upside such considerations are dwarfed and this should be a buy? Or maybe it is just corporate hogwash.

Judge for yourself and read the note in full HERE

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