A relatively short post today, as I'm a little tied up. People (and I include myself here!) tend to love a good bit of stock-market drama - unless they're involved, of course - and Albemarle & Bond Holdings (LON:ABM) have provided a fair deal of that since their surprise announcement that they were looking for extra funding since poor trading was going to leave them failing their covenant tests; those rules banks put in place when they lend money to you.
I've been interested for ABM in a while; ever since their listed sibling, H&T Group, caught my interest. Fortuitously - one of the great benefits of having a blog - I can quite easily look back on my train of thought over the last year and a half and compare my predictions to what actually happened:
Retrospective on a HAT/ABM long/short, Apr 13, 2013
A look at the blow-up, Oct 3, 2013
Balance sheet analysis (liquidation value attempt), Oct 8, 2013
From definitely bearish, to reasonably bearish, to slightly bullish yet suspicious about full-year results. As is rather a common occurrence, the death knell itself caught me by surprise - I was expecting bad news on the results, but I was expecting bad news that would present a potential buying opportunity - not bad news that would reveal the extent of the problems and unravel the business. That's a lesson in debt; operations, cyclicality, whatever you want to call it - they all become insignificant if a company starts testing their debt holders. We, the equity investors, are last in line.
What's new with ABM, then? At my point of last analysis, the company was being put up for sale and was trading at about 25p/share. I wasn't optimistic on prospects for investors, because I thought the incentives were all wrong. Who would buy ABM in its current state? Their largest shareholder, EZCorp, already refused to underwrite the rights issue which potentially could've solved the problems. They were doing that for a reason - either because they genuinely didn't think ABM warranted any further investment (and was thus a lost cause), or because they thought that waiting would allow them to swoop in later and get a better…
.png)
