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Challenger Acquisitions: Oh, oh, the wheel has finally stopped turning – could this be the end?

By Cynical Bear | Friday 14 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.

Not that Challenger Acquisitions (CHAL) has bothered with an RNS but the wheels are literally falling off here with disastrous news pertaining to its only real asset, the New York Wheel. If you haven’t got out already I suggest you do so now and save a few pennies while you can.

Challenger owns about 2% of the New York Wheel for which it paid $3 million and the bulls on this stock, well the Twitter rampers anyway, have been banging on about how great it will be; I have been taking the opposing view. Well, the owners of the New York Wheel have fallen out with its contractors, Mammoet-Starneth, who have just been fired pending a court battle. As a result the wheel has been “indefinitely delayed” and there will now be extra costs and delays, once it finds a new contractor that is.

Not good news.

In my view, the equity holding in the wheel was largely worthless anyway with about $200 million of very expensive debt in the wheel’s capital structure, but I see this as the final nail in the coffin. I doubt the wheel will open in 2018 now, if at all, and the debt will most likely overwhelm any remaining equity value so think it would be prudent for Challenger to write down its equity holding of $3 million to zero.

Some people may still be holding on to the hope that Starneth may do some deals and generate some funds for Challenger as part of its revenue share deal but considering that Starneth has ended up in litigation on both its recent New York and Dubai Wheel projects, I doubt that’s very likely.

So with Challenger’s assets now marked down to zero in my book and with millions of convertible notes still outstanding, the future doesn’t look very bright.

Any decent business would have put an update out by now, particularly as one of its board members, Rich Marin, is in charge of the New York Wheel project, but Challenger isn’t a decent business I guess. I would have thought that it would have asked its PR advisers, St Brides, to sprinkle some magic fairy dust on an announcement but alas no.

Word has got out though as the share price has drifted down to an all-time low around 1.5p and with Yorkville still desperate to sell its equity and convertible notes before the inevitable implosion, it’s only going one way from here.

I think my work is largely done here to be honest. I started warning about this car crash in waiting on my first day on the job in January 2016 when the share price was 37.5p compared to today’s price of around 1.5p. There may be a few stale bulls in here but I imagine that most got out a long time ago and it’s clear that any left in are either not readers of Shareprophets or are just ignoring me but, hey, I’ll see this through to the end.

Shouldn’t be long now!

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