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Tern – don’t be fooled by the headlines

By Nigel Somerville, the Deputy Sheriff of AIM | Tuesday 5 December 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.

Shares in AIM-listed Tern (TERN) seem to have stabilised after the bloodbath of last week, at 2.875p in the middle – having started last week at 4.5p and only in mid-August having completed a hugely discounted placing via Primary Bid at 6.6p. Ouch. This is all in response to the RNS last week announcing that it had signed up for death spiral funding. Yesterday, at 11am, Tern announced that was to issue 800,000 shares from the exercise of a warrant at 3p, and Alliance News picked up the story that Tern Issues New Shares Above Current Share Price To Settle Warrants. Don’t be fooled….

These warrants were issued way back on 24 November 2014 as part of a placing, on a 1-for-10 basis relative to the number of placing shares taken. Hargreave Hale took 8 million shares, so it looks like Hargreave Hale (now owned by Canaccord) issued the exercise notice.

But the warrants were due to expire on 3 December – ie last Sunday. By the close on Friday, the warrants were already out of the money. We’ve not been told of an extension….

Maybe there is some magical touch being employed by Canaccord, where it thinks it can make a profit by exercising at 3p when the bid price is just 2.75p over the weekend. That would seem odd when it could buy in the market more cheaply (and probably push up the stock price, with a knock-on positive effect on the value of the rest of the holding. 

Or maybe the stock had already been dumped, on a T+ trade – in which case Canaccord will have happily banked a few quid in profits.

The question now, of course, is what has happened to the rest of the holding? The last we knew was that it held 5.74% of the stock as at 20 September. Are we a few days from finding that it dumped the rest at the back end of last week, in the wake of the death spiral news?

Added to 800,000 warrants, dumping 7.4 million shares would cause a certain amount of indigestion in the market and surely would have contributed to the collapse in Tern’s stock.

We can watch and wait for an RNS on that score.

Meanwhile, one might wonder when the exercise notice was actually issued, for the headline from Alliance News leaves one scratching ones head.

Was it the dead hand of PR at work?

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