Parkmead - a definition of regret....

Wednesday, Dec 29 2010 by
8

.....is looking at the contract note in my file for the sale of 1 million shares at 1p each.

I bought in at 0.8p/share with the intention of sticking the shares in my bottom drawer for a very long time.

Subsequently changed my mind and decided that a better strategy would be to wait for some action to start and then get in bigger at the inevitable placing/fund raising without which the company simply cannot get its plans moving - whatever they are. And sold my holding thinking that the shares might easily drift and that I could get back in easily.

And then missed the jump when TC took the chair

step 1) And then thought the SP had bubbled and would deflate.

repeat step 1  at least 50 times

------------------------------

crazy thing is that the elevated SP is now, IMHO, an obstacle to the company moving forward. they need to raise cash but they cannot possibly do so at anything like the current SP.

There will be tears.

But the lesson is that markets are not always rational. We need to accept that fact and exploit it rather than bemoan it.


Disclaimer:  

The author may hold shares in this company. All opinions are his own. You should check any statements that appear factual and seek independent professional advice before making any investment decision.


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Parkmead Group plc is an upstream oil and gas company. The Company is an independent oil and gas, exploration and production company. The Company operates through two segments: oil and gas exploration and production segment, which invests in oil and gas exploration and production assets, and energy economics segment, which provides energy sector economics, valuation and benchmarking, advising on energy policies and fiscal matters, undertaking economic evaluations, supply benchmarking services and training. The Company produces from approximately four gas fields in the Netherlands and holds interests in approximately 40 exploration and production blocks. The Company has oil and gas development opportunities across the United Kingdom and Netherlands, including the Greater Perth Area oil development located in the Central North Sea. The Company also holds interests in a portfolio of exploration prospects alongside international partners. more »

LSE Price
80p
Change
9.7%
Mkt Cap (£m)
79.1
P/E (fwd)
n/a
Yield (fwd)
n/a



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42 Posts on this Thread show/hide all

loglorry 30th Dec '10 23 of 42


Parkmead now getting a good kicking as it most surely deserves down 13% to 27.8 as I write. I'm sure there will be quite a stampede to get out of this stock once the short covering rally runs out of steam. I'm short at an average of 28 so I'm just in the money here but I expect it to be back below 15 by mid Jan. Good luck to all but let's not forget this is still on a stupid valution keep selling!

Not sure it will get as low as 3p again but it wouldn't suprise me if they raised money under 10p. I think 8p might be a stretch to raise a big chunk of change at but they could probably raise a smaller ammount a bit higher.


As I wrote here yesterday it seems that the cracks were developing yesterday afternoon and after the 13% drop today it must now be curtains.


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sirlurkalot 30th Dec '10 24 of 42
4

In reply to loglorry, post #9

the actual total investment returns that stock holders would have received if they had invested in Dana at the time it was investable given fund raising and dilution since and it is nowhere near the ammount claimed by TC in many of his interviews. I think it was Sir Lurkalot who gave the most accurate account of the returns of Dana over the years

I don't think I deserve any credit for writing this - all I ever wrote, over and over again, was that not enough about field bbls remaining sizes was disclosed to allow a Dana NAV spreadsheet to be prepared.

 

 

IMO the best comparison for Parkmead now is Gasol a couple of years ago, which vaguely floated about plans of gathering gas around Nigeria to create a LNGable total.  When they did eventually announce the reversing in of some business, it was on the valuation basis that Gasol was worth near its mkt cap, which mkt cap was only anywhere near that level because investors thought a worthwhile business was almost contracted and ready to be announced.  I think it was http://www.investegate.co.uk/Article.aspx?id=200806020730006982V , but it was a while ago now.  This is IMO the model for Parkmead.  Arguably the AOL Time Warner takeover several years ago represents the same sort of monetising a virtual company by reversing into real assets.  I think there's a possibility that Parkmead will be happily trading away in a few years time, having a respectable mkt cap/NAV, having reversed into real assets, without ever having been below say 10p/sh.

In http://boards.fool.co.uk/ernie-your-question-is-a-perfectly-fair-one-that-11081845.aspx I wrote about Gasol:

"A ~£90m valuation for this £2.3m cash, contacts and a few preliminary legal contracts seems to me completely outrageous, and there's no way the £167m implied by the share ratio can possibly be justified, so there seems no chance of upside at present. There's no way I will be part of a valuation of ~£90m for those assets. It is possible that value will be created by deals soon, but (a) LNG deals are capital-intensive, and raising more capital is something Gasol may find difficult in the near future, and (b) they've got to create ~£88m of value just to get up to the current mkt cap, let alone progress onwards and upwards from there. I think there's a very real chance Gasol's shares collapse to a mkt cap of £5-10m, ie a share price of 0.5-1p"

The top line of this sounds a bit like Parkmead now.  Gasol's shares did collapse to less than 1p a few months later.  It's funny to read back that post now, I remember the "I went into full-on sell mode yesterday and this morning" moment - I've never tried so hard to get shares out into reluctant market makers as that day and I remember sitting on the roof terrace with my heart beating about twice its normal rate and sweating on whether I'd get rid of 'em.

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emptyend 30th Dec '10 25 of 42
1

In reply to sirlurkalot, post #24

I think there's a possibility that Parkmead will be happily trading away in a few years time, having a respectable mkt cap/NAV, having reversed into real assets, without ever having been below say 10p/sh.

The problem with that theory (which may well be the plan or part thereof) is that one has to find a company with real assets to reverse into. I'm not averse to the principle of such deals - but it surely relies on valuations being credible.......and AFAICT the vast majority of deals that get suggested are simply non-starters on price grounds.

It will certainly be interesting to watch though - and I regret not having taken a punt at 1p or so earlier in the year  (though I would without any doubt have sold out long ago!)

ee

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loglorry 30th Dec '10 26 of 42

Still heading down and I expect it to continue for a while. With these types of things once the bubble goes there is always a rush for the door. It does rather highlight how a small company with a small free float can have a market cap so far away from any sane valuation.

I'm pretty sure anyone long having bought sub-10p at these levels after seeing the sell off today will take profits. Hard to say if all the short covering is over though so the tug will go on a bit more.

I'm on a paper 4% profit now but I want a good bit more than that before closing out my short. Keep selling!

Log

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sirlurkalot 30th Dec '10 27 of 42

ee,

"one has to find a company with real assets to reverse into..... it surely relies on valuations being credible"

Oh yes I agree that it's a difficult transaction to pull off, as it is in effect a con trick that the virtual company really is worth the valuation the mkt is putting on it. But it might happen!  AOL managed to persuade Time Warner!  I vaguely remember when Morgan Grenfell bought Phoenix Securities, the private company of John Craven, at a silly price in 1987 just to get him as Chief Exec, which demonstrates that an individual manager might possibly be worth a silly price for his company just to get his management skills.

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thebuffoon 30th Dec '10 28 of 42
4

In reply to loglorry, post #26

I'm on a paper 4% profit now but I want a good bit more than that before closing out my short. Keep selling!

The relief is coming through loud and clear log. :^}

Interesting strategy though.... short 'em, watch 'em go up some more, short 'em some more, watch 'em go up again, then you forget you have a family, and frantically post how ridiculous the price is. Stop buying you idiots, stop!

Not a sound strategy IMO. Will it be worth it?

Buffy

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loglorry 30th Dec '10 29 of 42
1

Buffy not at all what I did. I put on a very small short then increased it selling the last lot at 37. My average is 27. In any case it isn't a big position but I will make a couple of thousand quid when they get back to 20p or so. For me it is worth the effort and I enjoy it anyway.

Obviously if I knew the top I would have Shorted it all there.

Fundamentally the stock is broken though so I'm happy

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thebuffoon 30th Dec '10 30 of 42
2

I can't imagine why anyone would give you a thumbs down for your post log. Although it might be something to do with your 'moving average' Was it 28 or 27?

I'm glad you are enjoying it though. It honestly didn't come across that way, and I'm not sure I would view it as pleasurable.

Cheers.

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nigelpm 30th Dec '10 31 of 42
1

Fair play to log - he had the bottle to take on the trade and decided to post it on the boards. Not sure what your posts are adding in terms of value "thebuffoon" and let's face it that's why people post their views and opinions?

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Fangorn 30th Dec '10 32 of 42
1

I'm not sure what the twit who is giving you the solitary thumbs down for each post is adding either.

Fair dues to taking a brave position. Now please keep shorting it back to my target of 4.5p :)

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cranbrook 30th Dec '10 33 of 42
4

I will hazard an uninformed guess as to what will be the next stage in this emotive saga.

Presumably Tom Cross has a target in his sights and needs financing. The City has been fully aware of for some time and could explain the extraordinary strength in the share price.

So something on the lines of a one for five share issue similar to the one in the Dana era.

Then an underwritten rights issue on a suitable basis of between 50p/100p a share as Faroe managed earlier this year.

Tom has enough cash to take up his and his wife's allotment.

Sell the Faroe holding and he is up and running.

This looks fairly straight forward so there is probably a flaw somewhere.


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loglorry 30th Dec '10 34 of 42

Cranbrook the flaw is the 608m shares now in issue. How do they keep their 30p shr value during this alchemy? They just can't. Ig they issue 100m new shares at say 20p to raise 20m that us now spread across 708m shares. Just doesn't work.

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sirlurkalot 31st Dec '10 35 of 42
2

The flaw is that, whilst a small number of PIs may be willing to pay prices of 20p or 30p for this, no institution will do so in large enough size to get away a share issue at anything near the current SP. No investment bank would underwrite such an issue. Would you personally, Cranbrook, underwrite a share issue at 50-100p? What makes you think an investment bank would?

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djpreston 31st Dec '10 36 of 42
2

Spot on Sir L.

The only way they would, of course, is if the issue came with an absolutely stonking deal set in stone.

Fund Management: European Wealth
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sirlurkalot 31st Dec '10 37 of 42

"if the issue came with an absolutely stonking deal set in stone"

Yes, but it would also have to be a very large deal to create enough value to digest the ~£150m(??) "intangible" value implied by the current SP.

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cranbrook 31st Dec '10 38 of 42
1

Thank you for your replies.

You obviously have a great deal more experience of previous episodes in the past.

However I still find it difficult to come to terms with the reasons advanced why the share price continues to hold up.

I would have thought most mug punters ( unpleasant term ) would have departed by now and how many would risk buying at the current price.

Why have the short sellers not been able to get the price down.

There seems to be limited selling from the majority holders.

So it lwill be interesting to see how it pans out in the New Year.

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nigelpm 31st Dec '10 39 of 42
1


I would have thought most mug punters ( unpleasant term ) would have departed by now and how many would risk buying at the current price.

Why have the short sellers not been able to get the price down.



It's all to do with liquidity and shares being held very tightly -

see http://www.reuters.com/article/idUSTRE49R3I920081028

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ohisay 31st Dec '10 40 of 42
1

In one of my emails tonight I noticed a comment from Simon Cawkwell -  sounds like he's licking his lips..

Finally, Parkmead (PMG) has passed into the realms of the totally surreal.
This is a bear squeeze applied to a limited float with the lemmings in flat out bite mode.
Just keep selling: this is the first coup of 2011

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emptyend 4th Jan '11 41 of 42
5

In reply to ohisay, post #40

Just a quick point for those who are short:

There is a need to keep a very careful eye on the short interest in PMG. There is a very substantial chunk of shares held by long-term holders....and there is the recent influx of "Irish Grannies" who (flush with the proceeds from DNX) may well be making a long-term bet on PMG.  Fundamentals will ultimately count for a great deal but, in the short to medium term, the share price is all about the balance between buyers and sellers......and it is open to some doubt how much of the sell side has been made up of "real money" and how much from people going short.

IMO short-selling PMG will continue to be a dangerous game in which there are likely to be periodic short squeezes (some of which might yet be quite violent!).

ee

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loglorry 4th Jan '11 42 of 42
2

Wise words ee and happy New Year. I don't doubt though that a lot of institutional money is short waiting for a placing to cover their short. Once this happens then this will provide a natural cover to their shorts. Once a placing is away then there will be a lot more shares in issue and the free float will be substantially higher making shorts squeezes less likely too. In the meantime though I agree it could be all over the place.

Log

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