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By Tom Winnifrith | Wednesday 6 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.
Big news today from the shysters at Green Dragon Gas (GDG) but does it change anything? Over to the City's No 1 oil analyst Zak "the Knife" Phillips at SP Angel who does not hold back:
Green Dragon Gas (GBG – 62p) – Listing Plans Ignore Underlying Reason for Weakness:
Today’s news that the Company will be listing its producing businesses on the Hong Kong Exchange to raise enough funds to pay down the debt on its balance sheet, citing the fact that the London market doesn’t value the assets sufficiently, ignores the one single largest flaw in the plan. London doesn’t value the assets because Green Dragon Gas is laden with debt that has had no way of paying it off for a long time, that was run up by a management team that overlooked the fact that the majority of its assets have been developed by a third party without its knowledge.
That’s why its poorly rated. So, what is going to remain in the London listing? Not much of anything. This management team have failed to deliver value on any basis for the shareholders, and are now seeking to take the value enhancing business away from those shareholders that have supported the Company thus far.
Instead of fixing the problem and addressing the issues that the market is telling them are there, management are taking their brand of failure to a new location. Given this, it is unlikely they have learned their lessons and will fail again. We believe that this is a wasteful exercise based on the management team’s vanity, but given the fact that the majority of shares are owned by a concert party to management, this resolution will likely be passed.
Best thing to do is to stay with the shares, get the new shares on dividend and then work with the new investors that come in through the HK listing to change the management team for one that can deliver. After the split, what’s left in London will not be worth anything.
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