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By Nigel Somerville, the Deputy Sheriff of AIM | Tuesday 8 August 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.
It is almost three years since the Equities First Holdings story hit the headlines with the deal signed up with by Rob Terry et al at what was then called Quindell – now Watchstone (WTG) – whereby the sale of shares via a non-recourse sell and buyback deal was dressed up as a director share purchase.
Mr Terry (and two others) defaulted and walked off with cash from the sale, but EFH was allowed to sell the shares as well, so provided that it did sell quickly both sides of the deal came out on top. It is a good business model when handing out finance packages to directors of AIM companies which might get into trouble - good, that is, for the directors who can cash in without telling anyone. But what if the shares roof it and EFH get to the end of the deal without the shares?
That brings me to AIM-listed IQE, whose CEO Dr Drew Nelson took an EFH non-recourse sale and repurchase deal on 10 October 2014. The repurchase price over 18 million shares was 11.4p, and it matures on 10 October this year. The only thing is that the stock is now 116p.
Now we know that EFH happily returned the shares in Angle (AGL) but this is a rather different kettle of fish, since with Angle the shares ended up lower. With IQE, if EFH dumped the lot early on, it is heading for an £18 million hole in the pocket.
Good news for Mr Nelson (and our own Malcolm Stacey), but this might not be so welcome at EFH Towers. Mr Nelson sold off 5.8 million shares as announced by IQE on 28 July 2017, with the RNS telling us that his intention is to settle up with EFH ahead of the repayment date and get his original line of 18 million shares back.
The question for me is whether EFH has indeed sold them, and if so, where will it get £18 million from to dig itself out of a hole? We’ll be keeping an eye on this one to see how it plays out.
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