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SHOCKING EXPOSE: Dukemount Capital – The latest Zak Mir assisted ramp

By Peter Brailey | Sunday 20 June 2021

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.

The current fashion for retail investors to back any old company that claims to be active in the UK intermittent generation market continues. Dukemount Capital (DKE) has been brought to my attention as one of the latest to attempt to tap into the retail enthusiasm for anything power and green related. Unfortunately this one does not pass my test as a worthwhile investment on so many levels.

It is worth looking at the history of the company. It listed on the Standard List of the main market in 2017, with the aim of property development. It quickly concluded deals to buy and build out two residential / mixed use schemes. These have now been completed and from what I can see have been sold onto institutional investors. In that process it has never earned a profit and not unsurprisingly generated no net cash.

The April 2020 year end accounts show £408,000 of cash at bank, but net current assets of only £90,000. Not unsurprisingly the company did a placing in March 2020 to raise £255,000 prior to the year end. With no material income from what I can see, the company must have been very pleased to see the chairman (Mr Geoffrey Dart) provide £500,000 of debt via a convertible loan note in December 2020. I would have to say I do not see any altruistic motive in this transaction when it was coupled with him flogging the vast majority of his shares and pocketing the £130,000 cash difference. It would seem to me that he has retained all the upside of is equity positon while providing a higher degree of protection in any downside situation, particularly resulting from dilution.

I rather suspect the company also welcomed the £135,000 cash inflow when he exercised 27 million 0.5p warrants, as did Mr Dart welcome the £81,000 difference between the exercise and market price on that day. The cash inflow from his brother exercising 15.25 million of 0.5p warrants in June 2020 when the share price was around 0.8p also would have also come in useful I’m sure.

In the interim results statement in January 2021, the chairman made reference to the potential to undertake projects outside of the building sectors the company had so far operated in, and so the announcement on 22nd March it was now looking to establish a JV to enter the gas peaker market was no complete surprise, but perhaps not what anyone really expected.

This was the date on which I would suggest the real rollocks started. The RNS told us the JV would look to develop two 11KV gas power peaker power plants. Now I do not care what voltage the generators produce at, there is a simple and relatively cheap thing to sort this called a transformer connected between the generator and the export connection (which is often 33KV anyway).

It went on to say the sites would be entered into the next UK capacity market auction. That means the schemes do not have the power offtake agreements that underpin a low risk investment in place, but may do in the future. So at the current time these are plans on paper projects. One can only assume the sites have planning consents and the like in place, but I cannot find this confirmed.

More laughable was the statement that the JV partner HSKB Limited complied with all current ESG guidance and legislation. I fail to see how that could not be the case. It was only registered in June 2020 at Companies House and I can find no evidence it has yet actually done anything, other than to move shareholdings between the founding Director, Mr Mathew Clare and Mr Paul Gazzard, a fellow director in other companies he holds an interest in and also a Non-Exec Director of Dukemount.

I note that company states that Paul Gazzard was a founding director of HSKB Limited in the RNS dated 20th May 2021. The records at Companies House record Mr Gazzard’s ownership as commencing on 17th May, not the formation date of 26th June 2020, when Mr Clare owned 100%. One could argue that is a minor detail, but in my book that looks like the work of Enid Blyton – pure fiction and should not appear in an RNS.

But the best statement of all is the claim this JV is the next step on the company’s target of becoming a £100+ million business. I’m sure Tom Winnifrith can outline the next steps he is taking regarding his plans for hooking up with Cheryl Cole and I can outline the steps I am taking to submit articles to Tom without any typos, spelling errors and perfect use of English. TW Note, I really do have far more chance of shagging Cheryl (ending her one year self imposed isolation she tells today’s Mail).

Still it’s nice to have targets even if the achievability could be and should be questioned on a fundamental basis, and of course them dismissed for being the result of over excitable imaginations.

I do note the main man at HSKB, Mr Clare, does have some track record in delivering projects via his part owned (with Mr Gazzard) company Arlington Energy. Perhaps I am just being an old codger, when I think it takes time to build real in depth experience, and hence it concerns me I was inputting to the Fort Dunlop Rolls Royce Trent powered gas peaker plant while he was still in nappies.

As a cash burning company with no material operations, cash inflow is needed. And so on 1st May a £1 million convertible loan note was issued to add to the debt pile.

The latest funding deal announced on 16th June is a hoot. It’s a claimed £6.5 million facility of which £3 million will be used to fund the JV’s first projects, which so far as I can see remain without Capacity Market offtake agreements. The remaining £3 1/2 million will come from debt into the JV. So I read that to mean the JV partner is not putting in a matching £3 million, but has the lead role in sourcing the debt. That’s a nice turn for the partner for a 50% equity stake, but a rather crap one in my opinion for Dukemount shareholders. Of course the minor matter of having confirmed off-take would be material to any lender.

It is no surprise to find the funding deal is not that simple- is a full blown “death spiral” lowest VWAP agreement, with no lower limit price. So that means the funder can convert loan notes and flog shares driving the price down while remaining in the money. Of course we have seen this one before. Widecells, subsequently of course renamed Iconic Labs (ICON) did the same thing. In fact with the same funder (Alpha Blue Ocean). The death spiral has played out is that case to the full blown morgue death rattles that Tom has highlighted  most recently here.

I can only conclude this company is trying to find a new path to greatness, funded by convertible loan notes which history tells us is not a great strategy. In fact it’s a really crap strategy that will cost shareholders very dearly at best. I would note it was fortunate Mr Dart converted so much of his equity into a convertible loan note which remains at par regardless of the level of equity dilution.

Of course getting away with a convert and dump share operation far in excess of the £2 million Market Cap is going to take some doing. I see Zak Mir is stepping up to the challenge and promoting away for all his worth, including an interview with Mr Paul Gazzard to be published tomorrow. I’m sure that will be highly informative and will dispel many of my concerns – or perhaps not? I rather suspect it is more likely I will learning nothing of merit, other than Zak will work with any old company regardless of positive investment case fundamentals as long as he is paid. For the avoidance of doubt as well as doing his “impartial and objective” interviews which he boasts he always does because he is a member of the NUJ, Mr Mir is also paid to do the PR for this fine company and is the contact on its latest RNS.

Needless to say this stock is a total bargepole to me. I await further rampastic rollocks to make me chuckle.

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