By Gary Newman | Monday 13 November 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.
Forgive me for being cynical, but when a load of private investors who are known for taking part in placings suddenly start raving about how great a tiny AIM company is, then flipping the recent equity raise immediately springs to mind!
Green energy provider Cogenpower (CGP) recently raised £550,000 gross via a placing of 220 million shares at a price of 0.25p as part of a Company Voluntary Arrangement to settle its debts.
Approval of this CVA by the creditors, with 1p in the £1 being paid to all of them, including the directors for outstanding salary payments, means that the company is now debt free plus should have some working capital to maintain solvency in the short term.
When it comes to smaller AIM companies, ending up in financial difficulties is hardly something unique to Cogenpower, but it is unusual for so much interest in a company in this position which is soon set to become a cash shell under AIM Rule 15, meaning that an acquisition which constitutes a reverse takeover must be made within six months of that happening.
Currently the remaining assets of the company are in the process of being disposed of, with all of the operating subsidiaries likely to end up going to CEO Francesco Vallone and possibly others on the board.
That will of course have to be done at fair market value, but given the situation that Cogenpower has found itself in, it may well end up being the case that the disposals don’t actually result in any cash flow coming into business – as the company itself has stated in recent RNSs.
Since returning to trading the share price has soared and it is now trading at around 0.8p, which values the company at a staggering £2.2 million.
There is still an outstanding dispute with the Italian government’s GSE department over the recovery of €1 million which the company is owed from Green Certificate environmental incentives.
I suspect that some PIs are pinning their hopes on this payment, but the reality is that it would go to the subsidiary, Cogenpower SRL, and if it was expected that it would find its way into the coffers of the parent company, then there is no way that the creditors would have agreed to the CVA deal that was on the table. Especially when you consider that the company had outstanding tax bills of €4.3 million as at the end of June 2017.
I was interested to see an RNS from Spreadex notifying that it now had holdings of 8.88% of the company, and this added to my suspicions about the involvement of some of the usual faces here, as we have seen similar holdings RNSs from Spreadex on a number of other shares where they have been involved.
It will certainly be interesting to see whether this is a longer term position, and if not, just how promptly the market will be notified as to any changes in holdings – recently on Greatland Gold it took three weeks from the actual transaction to the increased holding being notified to the market!
In my view this is just another in a string of pump and dumps which has reached a crazy valuation, and I suspect that in a short while once everyone has flipped their placing shares everything will go quiet again and the company will slide back into obscurity.
Even if it was to ultimately achieve a reverse takeover, it is hard to see how the current market cap would be justified, on the basis of the value of the listing plus likely cash in the bank.
If you’ve been lucky enough to enjoy the massive share price rise that we have seen recently then I’d certainly consider banking a profit before it comes tumbling down again – you can be sure that some of those heavily promoting the company currently certainly will be!
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