Good morning!

It's a very unusual day today - there are no results or trading updates at all, in my universe of stocks. That's rather handy actually, as I'm off on a jolly today - I'm visiting English wine producer, Chapel Down. Their shares are listed on ISDX - I reviewed recent results here on 22 Apr 2016. Pity I didn't buy some shares, as they're up 41% since then - a big rise in just 7 weeks.

There are decent shareholder discounts (about 33%, from memory), if you own 2,000 shares or more in CDGP (about £930-worth at current share price of 46.5p). Mind you, on trying their white wines previously, which retail for about £10, personally I wouldn't seek them out. Perfectly pleasant, but nothing special, in my view. I reserve the right to change that stance, after today's slap-up lunch, and wine-tasting at their premises. So there's the distinct possibility of some rambling Tweets later today.

A few other things have caught my eye today, so here goes.


Placings (again)

Some readers may recall that, a couple of years ago, I set up a (now defunct) website called PlacingWatch. I reviewed every Placing that occurred, and rated it on some key criteria;

  • Whether there had been suspicious share price movements in the month before the Placing was announced (which there often were).
  • Also I looked at the level of discount to the prevailing share price for each Placing (the smaller, the better).
  • Dilution should not be excessive (where the price discount is large)
  • Finally, I urged companies to include an Open Offer for existing shareholders to participate - especially where the price discount was significant.

I had expected to find considerable problems. However, in most cases, the deals done actually looked perfectly reasonable. If you buy shares in a small company, with a weak balance sheet, then you should accept that at some point you're likely to be diluted a bit by a Placing.

Institutions usually demand a discount of say 5-10%, to compensate them for the lack of liquidity - i.e. if something goes wrong, then they can't exit quickly, unlike small shareholders. That's not unreasonable.

You only really need an Open Offer for existing shareholders if a deeply discounted Placing is being done. If there is a deep discount, then chances are the company is crap anyway. So shareholders can't really blame anyone other than themselves if you get caught up in…

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