Good morning!

Accsys Technologies (LON:AXS)

A lot of small cap share prices have been drifting down over the quiet summer weeks. However, every now and then I look at a share that is relentlessly dropping a bit every day, and think to myself, I wonder when the bad news, or the Placing, will be announced to the market? Sure enough, usually a week or two later some price sensitive news is announced.

That's been the case with this company lately, and the bad news has been issued this morning, namely a bizarre tribunal ruling over a >E100m damages claim against Accsys by its former far eastern distributor, Diamond Wood.

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The good news is that the tribunal has ruled that damages cannot exceed E250k - so a bit of a difference from E100m! The bad news is that the tribunal says that the distribution agreement has to be reinstated. Furthermore, Diamond Wood is obliged to resume the construction of a factory to make Accsys's specialised wood product, Accoya.

This is clearly a ludicrous ruling. You cannot force parties to resume an ongoing commercial relationship, if they don't want to. Instead the legal system should be helping to ensure a fair separation takes place, with compensation as appropriate. I don't know any of the detail, but it sounds to me as if Accsys and Diamond Wood would be better off just negotiating a sensible compromise deal between themselves. Perhaps the tribunal wanted to trigger that happening by forcing them back together again?!

It's something of a cloud over Accsys though, which together with a rather toppy valuation, means I will continue to watch this one with interest from the sidelines. Longer term though, this looks a very interesting company, with a new product, which is in demand, globally. So I shall keep this one on my watch list, but would like a solution of the Diamond Wood problem before investing - big legal cases can often take longer & cost more than anticipated, and are also a big distraction for management.

There has been no share price move as yet (at 08:19), with only two small sells printed, and the Level 2 order book looks evenly balanced, so the market seems to be interpreting this news neutrally at the moment. 


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