Small Cap Value Report (Fri 5 June 2020) - RBG, SOM
Good morning, it's Paul here with the SCVR for Friday.
Estimated timings - I have to stop for a zoom meeting at 1pm.
Today's report is now finished.
Revolution Bars (LON:RBG)
(at the time of writing, I hold a long position in this share)
Key points (written before 8am market opening);
- Raising c.£15m (before fees)
- Price of 20p per share, a deep discount of 42%
- Firm placing: 45.0m new shares
- Open offer & placing: 30.0m shares - this is the most important part for existing investors to understand. Existing shareholders are entitled to apply for 3 open offer shares, for every existing 5 shares held. The open offer makes up 40% of the total fundraising - one of the largest I've seen. This is really good news (in a bad situation), as it means that we existing holders can stand our corner and apply for cheap shares ourselves, thus not being diluted as much as if it was just a placing.
- The key thing is that the share price should, theoretically, settle somewhere between yesterday's close of about 33p, and the fundraising price of 20p. This should mean that investors have a loss on our existing shares, but a profit on our new shares. The two have to be seen together. Whether the market will see it that way, remains to be seen, when the market opens. Remember if you sell before 7am on 9 June, then you lose your entitlement to the 20p open offer shares - that's the ex-entitlement date. [Edit: NB check everything with your broker, I'm not 100% sure about this specific point, my apologies]
- Moving from main market to AIM, mainly because that enables cheaper fundraisings. Otherwise, it would have had to go to the considerable time & expense of preparing a prospectus for this fundraising. I like this move, as it will enable IHT portfolio buyers to get involved. AIM is a more appropriate market for a micro cap.
- Main use of funds - to reduce gearing, which I'm sure everyone agrees was going to be too high.
- Bank facilities will reduce by half the fundraising amount, at £7.5m, but not until March 2021 - so it should now have tons of liquidity headroom for the foreseeable future.
- Board investing £132k - a worthwhile amount - I get the impression they are ordinary people, not wealthy people, so this is a useful sign of commitment. Bear in mind the Board also voluntarily reduced their salaries by 50% recently. I can tell you that they are working their socks off on behalf of shareholders.
- Finncap & Peel Hunt managed this fundraising. Thanks to them for giving such a large entitlement to existing shareholders, with the big open offer. I'm told that both brokers, and RBG itself of course, thought this was the right thing to do, given that the shares are widely held by private investors now.
- Re-opening of bars - scheduled for Aug 2020, with selective openings. I'll write more about this later.
Share count - here are the new figures to use when valuing the shares;
Existing shares: 50.0m
Placing shares: 45.0m new shares
Open offer: 30.0m new shares (any not taken up by existing holders, will be placed with institutions) Correction - sorry, I misunderstood this point. There actually will be an excess application facility, so all the 30.0m shares could go to existing investors. My apologies.
New total 125.0m (an increase of 150%)
.
My opinion - I was a bit shocked when I got wind of this fundraising earlier this week. Obviously once you're inside on the deal, then you have to keep total radio silence & cannot transact in the market. I'm not usually made an insider on many deals, but there are so many going on at the moment, that the odd one filters down to my level.
I had assumed (wrongly as it turns out) that the twice increased bank facilities had done the job, in terms of providing the necessary liquidity. But it now turns out that the company wanted to raise more equity too - probably under pressure from the bank, I imagine. What a pity that it had to raise money at this stage, just before re-opening, when uncertainty is at its height - hence the low price of this deal.
My apologies for me being over-bullish on the liquidity situation. Obviously at some point more equity would be needed to strengthen the balance sheet, but I had assumed that the company could get through the re-opening, then raise fresh funding at say 50p+ later this year, or next year. Unfortunately not.
On reflection, I suppose it's not unreasonable for the bank to ask that shareholders take up some of the strain, and de-risk their position further. After all, banks are not in the business of risky lending, due to their thin margins.
I zoomed management recently, and did a Q&A with them, see below. Nothing price-sensitive was disclosed.
The insolvency risk has now basically gone. Therefore, the business will be very much stronger following this big fundraising. However, that is now being spread over 150% more shares. Therefore the upside per share is not going to be as high, but if we take up our open offer entitlements, then we'll each have 60% more shares.
Example market caps based on new share count of 125m;
20p per share: £25.0m
25p per share: £31.3m
30p per share: £37.5m
35p per share: £43.8m
40p per share: £50.0m
Given the newly strengthened balance sheet, I think a successful re-opening (and assuming no second wave of covid) could see the share price recover to about 40p later this year, maybe?
What will it do today? Who knows. It depends whether "flippers" got involved in the placing or not - i.e. people looking for a quick profit who sell immediately using a short CFD, which can then be closed out when they receive their placing stock. I reckon we're probably looking at a fall to 23-25p today, so a painful day is about to begin. Still, it could be worse. Without the enlarged bank facilities, which enabled this placing to happen, then the share price could have been in single digits by now. Indeed, it bottomed out recently at about 16p. Therefore I can understand people being miffed with what's happened, but at least the business has been shored up to an extent that solvency is now secure.
Remember that many competitors won't be re-opening at all, so RBG is likely to have a considerable market share gain when re-opening is allowed. Therefore this is a time to hold our nerves, in my opinion.
Q&A with Rev Bars management
I've summarised this to just include the main points, and omit anything that might be commercially sensitive.
Q1. What is purpose of the fundraising?
A1. Debt reduction mostly. We don't want to spend the next 2 years paying down bank debt. Front foot move - want to take advantage of numerous opportunities in the sector - less well-funded competitors likely to go bust, we can take their customers. Single site acquisitions - our financial strength will enable great deals, long rent-free periods, on best sites that come up. Refurbs of existing sites can resume, key to gaining market share. We can grow the estate when others are out of the market, & create shareholder value, and no danger of going bust with extra funding. Right capital structure, we'll be under 1x EBITDA by June 2022 - first financial year unaffected by covid. Major shareholders have consistently told us they want to see debt down to 1x EBITDA, which is the right risk rating.
Q2. My main concern is dilution of existing shareholders. If the price discount is more than 10%, then I strongly urge you to do an open offer with the placing, so that the small shareholders are not diluted away.
A2. We can't guide you on price, that is a negotiation between the brokers & the institutions. There will be an open offer of £6m, with a clawback (i.e. instis get any new shares that existing shareholders don't apply for). Edit: but there will be an excess application facility, which means that existing holders could end up with all the £6.0m open offer shares.
Paul: Great. A lot of my friends & readers have followed me into this, so I didn't want to see them get sh*fted!
Company: We're cognisant that, particularly after a large institutional block of shares was recently sold & dispersed, private investors hold a lot of our shares, so we want to look after them. The company, and both brokers, think the open offer is the right thing to do. Any surplus shares that are not taken up in the open offer, would then go to institutions.
Q3. It's starting to look as if ending of the lockdown could be better than anticipated. How do you see it unfolding for you?
A3. Our base case is opening in August. But some hospitality may open from 4 July. We're planning on opening 6 bars from 4 July, to test out processes, social distancing, etc. We're planning on opening without late night trading to begin with, and with customers seated, because can't do social distancing. Why incur cost of DJs, door staff, etc.? That bit is mothballed until social distancing lifted. We'll focus on daytime & evening trade up to 11pm, with service at table, including launch of ordering app. Hoping that end of furlough scheme (end Oct) might coincide with end of social distancing, then we can bolt on the late night trade again.
Q4. Presumably the first bars you'll open will be the most profitable ones?
A4. Not necessarily, because the most profitable sites pre-covid may not be the most profitable now, given social distancing. So we're looking at sites with the biggest outside areas, tourist destinations, e.g. Albert Dock, Liverpool site. Want to get a spread across the country & type of bars, so we can learn & nuance the openings of the other sites in future.
Q5. Social distancing - how is it done, and will sites still be viable? How can you socially distance a load of p*ssed 18-25 year olds at all?!
A5. We have disproportionately large bars, so we have an advantage, can spread out furniture a bit more. 2.0m distancing rule is a problem. Feels like Govt wants to reduce from 2m to 1.5m - much better, 1.0m best. Budget of £2,500 per venue, for screens, hand sanitisers, etc.
Q6. Spreading business out over the day & week has always been a challenge for you. How do you drive that?
A6. Larger sites like ours should be able to open sooner, as we can spread out the customers. Focusing our managers on becoming excellent at managing the daytime & early evening trade. There's a medium term win here, where we can then bolt on the late night trade, onto a much better managed daytime business. We do 60% of our sales pre-11pm already (pre covid). We need to flatten the curve. A lot of 18-25 year olds didn't got out until 11pm, maybe drink at home before. That won't be possible, as nightclubs won't be opening, so we need to pull forward those customers - e.g. come out at 7pm, then in the kebab shop by 11pm, like it used to be when we were all at Uni!
Q7. BigDish is a good app for getting customers to pre-book. Will you do discount, or even surge pricing?
A7. We've just had customer research done which says our pricing is now competitive, rather than expensive. Roadmap for order & pay at table app has been accelerated, due to launch. So no, no plans to lead on price, we'll follow the market.
Q8. Rents - presumably you're paying the rents on top sites, to avoid losing the leases?
A8. We withheld March rents, and wrote to landlords. Most engaged positively. We've got 8% off the rent roll for March. There's a Govt summit on 10 June, with UK Hospitality, and trade bodies for retailers & landlords, looking at possible rent furlough scheme (where tenant, landlord, and Govt each shoulder 1/3 of the rent cost) - trying to broker a deal. We need shared pain. Not fair for landlords to expect 100% of their income, while tenant has 0% of its income. We think the majority of landlords are conciliatory & want to work together, as they don't want loads of sets of keys back. We want a deal with some kind of rent-free for the time bars were closed, and a move to turnover rents in future. We expect the moratorium on legal action against tenants (ending June) to be extended. Needs Govt intervention.
Paul: I agree, and recently wrote to my MP supporting the idea of a rent furlough scheme, which was mooted in the Telegraph recently.
Q9. Latest tweaks to the furlough scheme - will this force you into making mass redundancies?
A9. The cost is about £1m. Hopefully can mitigate that by having some people working part-time, and use furlough to top them up.
Paul: I think there will be a good payoff in goodwill terms, if you treat staff well during this crisis.
Company: Yes. We're doing engagement things with the staff now, rated at 93%, which is 6% ahead of average, best in class. We do a weekly call with HQ management. Just done a charity relay run, raised £10k for charity. Doing lots with the team to keep them engaged.
Q10. Suppliers - once you resume trading, I'm assuming that's cashflow positive - money in till now, pay suppliers later on 30 days. Will suppliers continue offering 30-day payment terms?
A10. Our major drinks supplier has been very supportive. It will be business as usual. Had one dispute with a supplier, since resolved. We can demonstrate from recent RNSs that we have adequate liquidity. So no problems expected.
Q11. Disposal of loss-making & empty sites. Has this deal gone ahead?
A11. We renegotiated it, as you can see from previous RNSs. Got £1.3m off the price, and more time to pay, deferred until September. Made it a cracking deal, as it saves £1m p.a. in future.
Q12. Any permanent rent reductions possible in future?
A12. Not at the moment, as we're in a holding pattern. But in future, we expect there will be deals to be done. We want to move to turnover rents, to give us some protection against any future virus outbreaks. There are a handful of sites where we're asking landlords to cut us a deal, otherwise there's no point in us re-opening those sites. As they are already shut, this is a much more powerful negotiating position, as a closed site wrecks the landlord's book value on that site, hence they're willing to negotiate.
Paul: Thanks for everything you're doing to keep the company going during this lockdown period, it's much appreciated.
My opinion - I rate this management team very highly. Every meeting I have with them, they have all the facts & figures at their fingertips, and seem shrewd & hard-working, experienced operators, with deep sector knowledge & experience.
With a strengthened balance sheet, there are no longer any solvency issues at all. Clearly a 20p raise, with lots of dilution, is a setback for the current share price. However, if we take up our 20p open offer entitlements, then we can offset the profit on those new shares against today's c.8p drop in value in our existing holding. Therefore, it's not actually that bad overall.
It's now all about how the re-openings go. Let's see what happens.
.
Somero Enterprises Inc (LON:SOM)
Share price: 215p (up 2% today, at 11:48)
No. shares: 56.4m
Market cap: £121.3m
(at the time of writing, I hold a long position in this share)
This company, based in the USA, makes & supports laser-guided concrete laying machinery.
Somero gave an update on 30 March, saying what you would expect - material impact on the business expected from covid, cost cutting, conserving cash, liquidity position is fine, etc.
Today it reports that further cost cutting & cash preservation measures have been taken. 20% of staff furloughed. Bonuses cancelled. Cuts to discretionary spending & capex. Achieving annualised savings of $5.0m.
Net cash position unchanged at c.$24.0m. Also has an unused $10m credit line. Looking into possible Govt support (why, they don't need it).
Current trading - 25% below original market expectations - I think this means revenues, not profit. Company remains profitable & cash generative at that level. Would still be cash generative if a further 20% fall in revenues were to occur - so cash breakeven point is c.$54m revenues. Uncertain outlook. New product development is continuing.
My opinion - this sounds fine to me, in the circumstances. It's a very cyclical business, as we saw in 2008, when it came close to going under. However, this time the balance sheet is way stronger, so I don't see any solvency risk. Particularly as this has been an artificial recession, caused by virus/lockdown. Hence businesses are (mostly) coming alive again. If the USA comes anywhere close to a V-shaped recovery, funded by unprecedented & massive stimulus, the SOM's share price should recover.
Therefore I remain happy to hold, and accept that 2020 results are going to be a write-off. It should not need to do a fundraising (famous last words!) although I think we have to accept that divis might not be forthcoming until 2021 or 2022 at a guess.
My conclusion? Nice company with good recovery potential.
That's it from me! Have a lovely weekend.
Best wishes, Paul.
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122 comments
This is a massive gamble. For RBG to come through there can be no second wave. Also, if they do open as planned they need a high number of paying customers. Risk/reward not worth it. If you are a gambler and fancy a punt - there should be lower entry in the near future
I agree, even if social distancing drops to 1.5m or less hard to see how Revolution Bars (LON:RBG) will restore previous levels of trading. Younger clientele also more exposed in the coming jobpocalyse.
Thanks for confirming the ex date is Tuesday.
I thought the post saying otherwise was wrong, but thought it worth checking, especially as I and probably others here too, bought back yesterday morning so as to be able to take up the offer.
Lots of misunderstanding here. As the post above states, ex date for the open offer is Tuesday. You’ll see the price fall to reflect this on Tuesday morning.
Yesterday’s fall was because the market took the news badly - rightly or wrongly.
See below extracts from the Offer Document. It says that Qualifying Shareholders are those holding shares at 5pm on 4th June (the afternoon before the announcement to the Stock Exchange).
Many of you have said my post is ‘wrong’. It may well be, however, my understanding is that any shares traded on 5th June (Friday) are not ‘settled’ until Tuesday 9th (T+2 working days'), that is, after the ‘ex-entitlement date for the Open Offer’ and therefore are not entitled to the Open Offer.
As 'Yorkshirecurlew' states in a thread much further below, the ex-entitlement date is synchronised with the above.
Therefore the shares traded on Friday effectively ‘ex-entitlement’ and therefore reflect the dilution.
As I said above, I may be wrong but it is my understanding, but might be flawed.
Richard
“Principal terms of the Open Offer”
The Directors consider it important that Qualifying Shareholders have the opportunity to participate in the Fundraising and the Directors have concluded that the Open Offer is the most suitable option available to the Company and its Shareholders.
The Open Offer will provide an opportunity for all Qualifying Shareholders to participate in the Fundraising by both subscribing for their respective Basic Entitlements and by subscribing for Excess Shares under the Excess Application Facility, subject to availability.
"Qualifying Shareholders"
Holders of Existing Ordinary Shares on the register of members of the Company at the Record Date with the exception (subject to certain exceptions) of Excluded Overseas Shareholders.
"Record Date"
5.00 p.m. on 4 June 2020.
Typically with an open offer the initial "Record Date" relates to "Record Date for the purposes of mailing ("Mailing Date") entitlement under the Open Offer for Certificated Holders" (I have lifted this text from another open offer document).
I agree that without this wording, RBG's RNS is ambiguous/arguably misleading.
The Ex-entitlement date is clear in RBG's RNS though - Tuesday pre-open. This is a trade date entitlement, not a record date entitlement, so your T+2 explanation below isn't relevant here.
I am almost certain you are incorrect in your assumptions here, and we will see the fall tomorrow; it would pay for any readers following this thread to double check with their broker.
Superb write-up Paul on Rev Bars.
My take on things, if my little island of Guernsey is anything to go by (and we now have no Covid-19 cases on an island population of 60,000), last night the clubs and pubs were mobbed (the joys of having a 20 year old son...)... Based also on Friday closing prices the sell off was not anywhere near as bad as it could have been. I think you have much support in the Stocko community and your detailed insight gives me confidence to take up the writes issue and hold.
Keep up the excellent work
Mark
Are you sure about that Richard?
I thought the last day to buy was this coming Monday.
I liked the way you tried to push BigDish into RBG !
Job numbers hit record for the month -2.5 Million -watch the Dow fly today !
Tell me about it! My short got stretchered off (again!).
If this number is correct, i.e. not an error (which does happen with economic data), then it's a game-changer. I switched from short to long when I heard it, but wasn't quick enough to avoid a thumping great loss. Maybe I should leave the Dow alone in future!
Maybe I should leave the Dow alone in future!
That's the problem with futures you need to know the future!
Your write up today on RBG and SOM is a stunning performance
Thanks Richard, very kind!
"Never bet against America" - Warren Buffett
Hi Paul. You have said that you expect Somero's 2020 results to be a write off. It appears that you are NOT expecting there to be a another price fall sometime between now and just after the results are announced? I assume that, if you did expect a further fall, you would sell them now and maybe buy them back later when you expect the price to be lower. Please could you explain your thought process on this?
On smaller positions, I don't mind if it drops say up to 20% in the short term, as I'll just ride it out. You can never exactly time the buy or sell decisions to perfection, so I'm very relaxed about short term adverse price movements.
The point is mainly that the market seems to factoring in poor 2020 results, and looking beyond them. We all know that 2020 results are going to be bad, so this is now priced-into the market, arguably. I'm becoming gradually more convinced that something close to a V-shaped recovery is looking more likely. Just look at the US jobs report today, and the massive recovery in the Dow from its lows. Many of us thought it was blind optimism driving that, but it's looking increasingly likely that the buyers knew something we didn't.
It appears we are in a gigantic equities bubble imo.
To my disbelief RBG have bounced back up to 29p and I just sold my remaining stake.
I've just worked out that 29p today (including new shares mkt cap of £37m) is equivalent to about 72p yesterday (excluding new shares) yesterday's closing mkt cap was about £17m.
It seems people are somehow not factoring in the 150% dilution here. Or am I missing something?
I've gone 85% cash as of today now... I'm getting seriously nervous about this market!
Even in the US bankrupt companies like Hertz have gone up 100% in each of the last 2 days. What is going on?
Airlines have also made crazy recoveries vs their actual reality. DTG now has a mkt cap of almost £1.8 Billion and is near enough trading where it was pre covid.
I'm genuinely perplexed!
Central Banks and FOMO (Fear Of Missing Out) . Those two combined are propping up this house of cards. Trouble is if you don't play along you literal do miss out.
It reminds me of the 2008 Financial crash where some people sold their houses only to find that the whole mortgage / lending market would be propped up by 10 years of 1% interest rates.
It also reminds me of a game of musical chairs and eventually you get to the point that there is one chair left, then music stops and..........
Agreed... it is complete FOMO!
When I've got mates asking me how to invest in x company who have never invested in their lives I know it's in bubble territory. Starting to remind me of the Crypto bubble a few years back.
Made great money this past few months but only playing with a tiny part of my portfolio now.. a good night sleep is worth more than chasing any stock up to even more eye watering levels.
Be interesting to see where this goes.
Will it just keep going up OR will their be some Bill Ackmann mk 2 trades coming good v soon?
Fascinating stuff :)
Ben316 Dart (LON:DTG) is still down 50% from its pre coved level of around £20
No it's not.
Mkt Cap at its peak of about £19.50 per share (Pre dilution) was around £2.7B.
Mkt Cap (Post dilution) is now £1.8B @ £10 per share.
Do the maths
Revolution Bars (LON:RBG)
ben316
I've just worked out that 29p today (including new shares mkt cap of £37m) is equivalent to about 72p yesterday (excluding new shares) yesterday's closing mkt cap was about £17m.
The dilution is massive you are 100% correct there - however £15 million has been knocked off the debt pile - so (1) there is less chance of company going pop (2) the £15 million extra can be put to good use - ie there will now be less interest payments than theere would have been so there will be some compounding of the £15 mill generating a return (by the busines shaving less costs and more profit)
Generally it is existing holders worst nightmare if they bought at much higher prices as they are much less likely to get back to that position and they have much less of the pie when it comes to divis - however if you splash the cash and buy more then that brings your overall cost down. There is no way around the fact unless you add biggie at the lowpoint a fundraising at 50p or more would have been much better result.
It's very common to see share trending downover when things start to wrong solvency wise and this is really ever decreasing circles in that unless the board havd big kahunas the longer you wait the more dilution you face. Unfortunately the decision makers probably score more by doing the big dilution and keeping their jobs than taking the slight gamble that funds will not be ncessary and have a small chance of forcing the company to fold.
I prefer to be on the sideline in situations like this and invest when the solvency risk has gone at least you know what you are getting and that isn't immediate 150% dilution.
Even in the US bankrupt companies like Hertz have gone up 100% in each of the last 2 days. What is going on?
Kinda remind me of the guy i knew who had shares in qxl.com **(ebay lookalike of its day) - the shareprice went up something over tenfold in short order - its just a shame that he had previously lost 99.something% of the money he had originally invested - so the miraculous comeback from the dead still gave him a pittence. I would guess the Hertz shareprice is still in the doldrums despite this increase (ok i did cheat and look).
** strewth did someone really pay nealy a billion for that company way back when ?
DTG was trading at around £19 per share pre covid, today its just gone back through £10, which is why i have personally sold out, because as you said, some airlines have had big recoveries, and i can not see this carrying on like it is, i'm not sure if those crazy Americans are dragging us up with them, but something has to give soon !!!
Yes it’s back at £10 with but now has 40m new shares in issue vs when it was at £19. So a pre share issue share price of about £13 quid currently! Very odd
The stock market is showing its worth here, this crisis is a great advocate for stock market capitalism because the stock market empowers and is consisted of companies with access to cheap money to take market share from non-listed companies hit harder by this crisis and who will therefore be stuck in the mud when it comes to re-opening and paying staff/bills etc.
Just look at what happened to Branson and Virgin Atlantic.
I'm genuinely perplexed!
You're not the only one. It's completely nonsensical. We keep hearing about recession/depression?
Ben,
For once the retail investor comes out ok from so far from this fund raising. If you work out the value of your holding at close at 34p yesterday and assume you intend has taken up the 3 for 5 offer at 20p, then the weighted average cost/value of your holding is 28.75p. The market price is 29p, so just about even (so far) but with the significant benefit of having a stronger balance sheet.
The rise in market cap from yesterday (50m shares at 34p = £17m) to today (effectively 125m shares at 29p = £36m) reflects £17m 'enterprise value' yesterday plus £13.8m 'new funding' = £30.8m, so the market cap is effectively up c£5.5m (to c£36.2m) reflecting the stronger balance sheet and lower risk of insolvency.
In summary, RGB has money to pursue a path out of COVID, retail investors value (so far) has been preserved (and not forgetting the real short-term winners in the deal are those institutions that subscribed at 20p today - a discount of 9p per share at the closing price - effectively they negotiated a 9p times 45m shares = £4m discount).
Bottom line is that us small retail investors are better off than we were 24 hours ago. Hope this makes sense... Richard
ps you had rights to subscribe for share numbering 3/5 the holding you sold today at 29p for 20p - value that will be hoovered up by other investors in the upcoming offer. However, you locked in 29p whereas the rest of us holding will continue to ride the rollercoaster. Best of luck.
Richard, I’m sorry friend but you could not be more wrong.
1000 shares at 34 = 340
3/5 = 600 at 20 = 120
1600 shares for 460 = 29p
So what’s wrong ? This is just an x rights price so I guess firstly you have to ask was your in price 34 ?
Secondly - the shares are still trading with entitlement to the open offer. Next week you will see how they trade without this.
The thing is the company have actually issued 75m shares, that’s 1500 at 20p in the above example for £300. So to not be diluted you must buy 1500 shares and the average price ends up 26p. But these shares now don’t trade until end July ! Their value is fixed at 20p. They entitle you to a share in a business that is closed. So you have £15m fixed value plus 50m shares floating value until end July. Next week we will see how they trade.
Make no mistake - if a company has to raise 100% of its market cap by issuing 150% new shares - it went bust. I’m not sure how that is a good outcome. For new investors at 20p maybe.
Pre covid the shares were mid 60s -
1000 at 60 = 600
600 at 20 = 120
1600 for £720 is 45p. I guess this could be a more accurate in price for existing investors who did not average down.... to judge against next weeks price .. which I think will be 20.
That’s not to say it won’t be a good investment now, it’s a different beast now. At some cost though.. the company had no assets and borrowed against EBITDA — so when that disappeared — it went bust.
I hope that makes sense - it’s a bizarre situation.
I thought Howard Linzon captured it nicely:
It's only a a bubble when everyone has stopped calling it a bubble. Still a lot of doubters left to capitulate .
I think Revolution Bars (LON:RBG) did very well to capitalise on the recent relief rally and get the raise away at 20p.
Proforma with 125m shares in issue and say 25p ex-entitlement price you have £31m market cap.
Net debt will be £22m - £15m raised + costs so say c£8m.
But net debt was £10.5m on 18th March & £22m today so cash burn of a fully closed business is around £4m a month. There's at least a month of closure going forward plus say 3 months at 2m social distancing so that could easily be another £10m cash burn to cash b/e.
On 18th March (https://www.investegate.co.uk/revolution-bars--rbg-/rns/covid-19-update/202003180700075427G/) they also mention:
- Suspension of rent and deferral of business rates
- Requests to defer PAYE and VAT payments
It is not clear whether owed busines rates, PAYE & VAT is included in the net debt figure or not but if it isn't thta could be another significant sum. Without knowing for certain let's be charitable and say they have added these into net debt already.
If I was a landlord and I knew they had just raised fresh equity then I would not just accept a rent holiday and would want my pound of flesh. I reckon they could easily have to agree c£5m payments to landlords for this period or face winding up orders.
So you have an absolute minimum EV of £50m for the recapitilised business when it returns to normal trading.
In their best ever years in 2017 & 18 they did £15m adjusted EBITDA but only after very heavy adjustments. Profits were also flattered by a pretty optimistic depreciation policy. So the business would appear to be fairly priced if they can return to record trading.
So any upside on the current share price requires you to believe that Revolution Bars (LON:RBG) will not only survive this crisis but come out as a net winner and trade above the level they did in their best ever years.
Yes they are much more likely to survive, but that doesn't mean putting in fresh equity at 20p on a very optimistic future valuation is a good idea for shareholders.
The cash burn is actually £1.6m per month at the moment. The reason that cash fell by more than this, is due to working capital unwinding. You need to look at the broker notes for more accurate figures than yours! ;-)
Also, what is the relevance of quoting 2017 & 2018 when the company has changed policy so much since then e.g. refurbs instead of new sites, along with the pre Chinese virus improvement in trading shown the various RNS'.
Hi Dangersimpson
I somewhat share your view.
Revolution Bars (LON:RBG) is still worth shorting for now. Crowded clubs and nightspots are likely to be last to open, as is the case with South Korea. See no reason to trust this company's business model either, which has destroyed shareholder value for over 9 years. I can't see it be worth more than NAV value in the near term. Still could go bust dependent on what the government decides to do. This looks like a high-risk low reward investment according to my model see graph below.
Placing provides an excellent opportunity to SELL SELL SELL!
I hold no position current but do plan to short this stock.
BSV.
CWD Countrywide has been a real dawg for a long time but released a holding Rns today that suggests an overhang has now cleared. As a result it has topped the risers board today. This is the largest estate and letting agent in the UK with about 60 brands including Bairstow Eaves. This company has been badly managed in the past and the share price has collapsed from something like 600p to about 2p at the lows equivalent (it did a consolidation at 300p if I remember and the shares promptly lost a further 85% at the lows). This week it was reported that Rightsmove records 'busiest day ever' as housing demand spikes. Will covid result in record housing business especially as older people sell up and move to the coast? I am mainly a landlord and have been told that bungalows in particular on the South Coast are selling very quickly without much of a discount.
Very risky and too much debt.....but also rather interesting imo. Definitely one for the punters only (disclosure: I hold these and sold a few today).
Somero Enterprises Inc (LON:SOM) dividend, - this year's dividends have been deferred till February 2021, not cancelled. From the March RNS:
"In accordance with Delaware Law, the US state in
which Somero is incorporated, the Company is deferring the record date
and payment date for the dividends and not cancelling the dividends.
Therefore, these two dividends will now be paid on or about February 5,
2021 to shareholders of record close of business on January 8, 2021."
As a Somero Enterprises Inc (LON:SOM) shareholder, I'm glad they will pay a dividend eventually, but don't think they should be seeking Govt support (even if it is the US rather than the UK govt) while at the same time paying dividends to shareholders.
For me a big imponderable with Revolution Bars (LON:RBG) is the leases. The liabilities as shown in the interim accounts as at December 2019 were £119 million which is a very big number compared with a market cap of around £30m after this fundraising. I know Paul does not like IFRS 16 but it does focus the mind on the extent of the lease liabilities.
Clearly management is hoping to negotiate some rents downwards and reduce that liability.
I would think they will be doing well to reduce the pv of the liabilities by 10%, so £12m, and I would have thought the best case is a 20% reduction, i.e. £24m. In theory the value of the shares ought to increase by the same amount – except there is presumably some expectation of a rent reduction already baked into the price - at a guess some 5% i.e. £6m. So if they achieved a 10% reduction that ought to add a further 5% of the lease liabilities to the market value of the shares, which on the enlarged share capital would be about 5p per share.
Of course, that is all rather theoretical and there will be many other factors which drive the share price. The other big imponderable is how well they will trade when they reopen. Young people may well be blasé about the risks and want to party but until the virus goes away or there is a vaccine I think social distancing is here to stay, which must reduce the capacity of the venues substantially. Indeed there seems to me a danger that people will prefer to party in private houses where enforcement of social distancing is impractical rather than in establishments which have to obey the regulations and where they have to sit at spaced out tables. (So restaurants may fare better than bars?)
As Paul implied yesterday there is a lot of momentum behind the “re-opening trade”, but to my mind anything in the leisure sector is a gamble until we see what actually happens on re-opening.
Thanks to Paul for his openness, and honesty on Revolution Bars (LON:RBG)
However, for me personally I fear we have been going backwards on this stock since the failed bid. The fact is that for a long time if you have tried to average down, you still didn't seem to win or find the bottom price, and this large dilution, unless you participate, is a bit like having a gun pointed to your head.
Maybe there will be a point at which there is some blue sky. At least I guess we can say the management are sharing some of the pain. Let's hope however we are not faced by a huge management options bill next.
re Revolution Bars (LON:RBG) there is scope for some fun and games. ie volatility.
In todays price clearly some value is still attached to the open offer. 7 ish pence * 3/5 = 4p per existing share. So on June 9 - without entitlement - this will fall away.
So the shares will trade close to 20p - assuming no further news. You then have a fairly lengthy process. Open offer shareholders will not be sent certs til 15 August. From tomorrow receivers of the placing will know their allocation. If they are existing holders - they may sell their existing shares - and likely forego any shares in the open offer.
The result of the open offer will be known by 25 June.
Assuming there remains good demand for stock at 20p that is where they will trade but I wouldn't rule out a move below over the next month. The shares would then recover when all goes through. 10 weeks can be quite a long time in these markets.
The Open Offer is only for 'Qualifying Subscribers' i.e. those on register at close 4 June. Anyone buying today misses 7am 9 June cut-off as the purchase doesn't settle till T+48 (i.e. after 7am 9 June). So today's share prices already reflects the 3 for 5 open Offer. Not to say that the share price won't decline in coming days. Nonetheless, based on the market close today and the fully subscribed placing, the discount to yesterday's close was a little too deep - but only hindsight tells us that.
Incidentally Paul I enjoyed your push of BigDish. (not a holder)
Bit of side infor, had a gander at the Big Dish app today, looks good - 50K + downloads on Google Playstore, dont have a working apple product to find out the range for App Store.
DISH are on the app store :) it's a really good app
and they are adding delivery/takeaway service to it very soon. Names being added to the website/app as we speak... It's a volatile stock for sure but this could be a BIG multi-bagger imo
Incidentally Paul I enjoyed your push of BigDish.
Haha, yes I couldn't help myself! ;-)
RBG seriously, SOM & MIND the thinking mans share
Paul, do you have any recommendations for an execution only broker who can interact with Hargreaves Lansdown who do my admin? Not necessarily looking for cheap but i need them to be able to work an order in size in smaller cos.
Sorry, no idea. Maybe readers can come up with a couple of suggestions to help you?
Interactive have a high level service where its more akin to institutional but you have to pay. I know hi frequency day traders use it... for me it doesn't work as I don't trade that much.
Somero Enterprises Inc (LON:SOM) I thought the trading update was positive this morning and surprised at the lack of upward reaction to the share price. Looks like they can break even at $50m revenue and with $24m of cash in the bank they have lots of liquidity. In 2008 this company nearly went bust because of the amount of debt and that cyclicality has held the shares back from a decent earnings rating in the good times. It seems management learnt its lesson and can now control the business much better against sudden demand drops. I know the've argued that for a while but this is clearly the acid test and should provide credibility.
In my view this should bode well for future valuations as earnings move back up as there should be much less concern around their ability to manage cycles. Long term market looks robust. I hold.
Hi Ben, Check your account with your broker. HL already has a message on accounts held by its customers as follows-
"The Open Offer will be available to all Shareholders as at close of business on 8 June 2020. If you hold Shares at this time you will be entitled to purchase 3 new Shares for every 5 Shares held, at a price of 20p per Share. Excess applications will also be allowed.
Entitlements to participate will be issued from Wednesday 10 June. You need take no action at present. We will write to Qualifying Shareholders confirming full terms of the Open Offer shortly after 10 June 2020, at which point an online election facility will be enabled for qualifying shareholders to give an instruction. Our deadline for the Open Offer is expected to be noon on Tuesday 23 June 2020."
I'm sure other brokers will have similar arrangements in place.
regards, Andy
All sorted.. cheers
Existing shareholders can apply for excess shares, I have 'cut & pasted' the following from the RNS;
"The Open Offer will provide an opportunity for all Qualifying Shareholders to participate in the Fundraising by both subscribing for their respective Basic Entitlements and by subscribing for Excess Shares under the Excess Application Facility, subject to availability."
Oh that's interesting, I was told otherwise. I'll check it out & come back to you. Right, I've spoken to Finncap, and yes you're right, there is an excess application facility for existing shareholders. So shareholders in RBG can indeed apply for more shares once their full entitlement is taken up. If the price remains well above 20p, the I anticipate strong demand for that.
My apologies for previously getting this wrong, I must have misunderstood what they told me, will edit the article accordingly.
Regards, Paul.
Hi Paul, would be interested on your views on Stobart (LON:STOB) which seems to have just pulled off the same trick as RGB. Are we likely to see much more of this?
The detail and effort you put in this £RGB update is truly amazing Paul. There is no way most of us would be able to get 20% of this information and yet we can sit with our coffee and get a clear detailed summary of the business and what is happening thanks to your efforts.
It really is so valuable and appreciated.
Very kind, thanks Vader!
Where I've been bullish on a stock, I feel an obligation to keep readers properly updated, especially when things are going wrong, and need explaining in detail.
It helped that I was primed & ready when the announcement came out, having had an opportunity to have a confidential chat with management beforehand, obviously subject to the strict rules of being made an insider.
It really annoys me when information leaks out about fundraising deals. I think it's highly irresponsible for some journalists to publish market rumours about fundraisings. The current system is flawed, but only works if everyone who knows about the placing keeps totally silent.
I understand that RBG may need to raise money but why are they destroying shareholder value by doing it at such a huge discount to the market price surely 25p would have been better than 20p
The price is set by the institutions & broker, in a negotiation. As explained in the article, it doesn't destroy value for existing holders, because we can take up our open offer shares at 20p, which are now valued at about 25p. Therefore there's a 5p profit on our new shares, to offset against today's c.8p drop in our existing shares. You have to bundle them together, to see the whole picture.
Paul, thanks for this morning report on RBG, do you expect the SP to fluctuate on 9th June as shareholders take up the offer? Will the majorty of the volatility in price happen today?
Paul, thanks for this morning report on RBG, do you expect the SP to fluctuate on 9th June as shareholders take up the offer? Will the majorty of the volatility in price happen today?
I've no idea, each situation is different. Sometimes the share price drifts down, or even below the placing price. In other situations, the placing price puts a floor under the share price, and it recovers nicely.
My feeling is that a successful re-opening of bars could reinforce confidence in the future outlook. The market generally (especially in USA) is getting super-bullish about the economy re-starting, and investors seem to be looking through 2020 numbers as not representative of the future, and instead focusing on 2021 and 2022 numbers. I'm not sure we're quite that forward-thinking in the UK though!
The other thing to consider is that with interest rates probably at zero forever, with bouts of QE to hoover up unwanted Govt bonds, then equities could still be seen as cheap. After all, a PER of 20 is an earnings yield of 5%. If you can only get 0% (or even less!) on Govt bonds, and nothing from bank deposit accounts, then equities or property suddenly look a lot more attractive.
Another fund raising sneeked in last night - - Stobart (LON:STOB) - any worthwhile thoughts here please.? BTW - just noted that Toscafund is the main shareholder here(along with Woodford!) - and also with Ted Baker (LON:TED) who are aslo raising - must be an expensive time for them....
Paul are you (or anyone else) still short Ted Baker (LON:TED)?. I sold my smallish holding on the day of the rights announcement, went short from 140p-115p odd and closed but see it has bounced back up a little. Given the number flooding the market at 75p and an easy 60% odd profit here I'd expect a fall back
Intruiging situation here topturkey - sold Ted Baker (LON:TED) on monday at 138ish - and still have rights to buy the open offer shares at 75p. Not exactly a moneymaker but a little help perhaps towards the losses!
SAME! I did not notice this until you mentioned it and I checked my broker inbox. Thanks.
Away from RBG, I had to do some furniture shopping yesterday. I tried to go to the IKEA near Wembley but there was a one and a half hour queue! I went to nearby DFS and there was no else in the store and a member of staff said it had been very quiet since opening. There could be a big range in retail performance in the next few weeks.
From langton capital today, an interesting point on lead times & a read through to supply chain impact. Just because one industry is starting up doesn’t mean its supply chain is. These are totally unforeseen (but not unforeseeable unless you are a politician or government advisor of course) consequences and i wonder how much we will start to see this. Hard enough for a brewer but for car manufacturers who have 1000’s critical part suppliers, well a bit of a headache I suspect, and for a small cap manufacturer, possibly life threatening.
- The BBPA has called for ‘at least three weeks’ notice for brewers, to ensure fresh beer is available for pub re-openings, as new data shows beer sales fell by 24% in April.’
• We have suggested that brewers cannot operate on rumour, whispers and the like. The brewing process takes as long as it takes. If brewers aren’t relatively sure that pubs will be open on a certain date, they may not invest in the product and processes necessary to supply them with beer. See our various tweets. Pubs will also need to clean up and make sure that staff haven’t drifted off into the furlough fog.
• For pubs, it would be a dreadful shame if cask was not available. They may be able to manage for some time on bottled beers, wines, spirits, soft drinks and food.
• The BBPA says ‘pubs will need a minimum of three weeks - but ideally four weeks - notice to allow them sufficient time to prepare to re-open.’ It would like firm guidance by 13 June as to whether pubs will be opening on 4 July or not.
Hi Paul,
RBG - how do we participate in the 20p offering? Presumably our brokers will contact us?
Also when will the new shares hit our accounts?
My remaining average is at about the placing price after having sold 1/2 my holding on the recent spike to 37p. Still lost a load of profit on the other half though which is annoying but I can see why they’ve done it.
Normally brokers email or post you a letter, giving you the option to take up your open offer shares. So you have to respond to that email/letter, specifying what you want to do. Usually it's take up some, or all of the open offer. The default is that it would lapse - i.e. you cannot sell on your open offer entitlement, as I understand it. I don't think there will be an excess application facility with RBG's open offer, because surplus open offer shares are subject to a clawback for institutions.
Dates are in the RNS today.
Forgive my ignorance but how do existing shareholders apply for their entitlement of new shares?
Your broker should contact you. If they don't then you need to contact them, if you want to take up your open offer entitlement.
Hi Paul, when is the above happening with Revolutions?
See RNS for all the dates.
Wrt RBG , the record date is not important.
As long as you hold the shares at close of business on the 8th June , you will be entitled to the open offer shares at 20p.
Paul
on RBG can you buy more shares now ahead of the ex entitlement date and participate in the open offer or is it holders on the record date only?
HB
Good point, the record date is June 4. In theory you can but your broker may not wish you to because they cant process it, it is worth checking.
Its also worth noting that for a month you only have 50m shares available to trade. If something good happens ... adding say 10% ie £3m value.. you could add 6p to RBG... or the reverse. So the stub equity for the next month can be very volatile because it is £13m of equity recognising shifts in value on £30m+ of equity value.
Given the record date is the 4th I'm a bit confused by Paul's comment: "Remember if you sell before 7am on 9 June, then you lose your entitlement to the 20p open offer shares - that's the ex-entitlement date".
I imagine if you want to buy or sell you will have to speak to your broker.
me too. I'm not sure he is correct
I just copied the date from the RNS. Let me know if I've got that wrong, and I'll correct the article. Apologies if it was wrong.
the latter I believe. if you buy today they settle T+2 which is Tuesday. these dates are deliberately synchronised. I don't believe you can buy today and get the entitlement. you had to be a shareholder of record yesterday. I think...
Revolution Bars (LON:RBG) .. a few comments...
The intention is to build a book with the placing at 20p. I would assume this is done. This means the success of the open offer has no bearing on the company. Either the placees take the stock .... or the existing shareholders can claw back and participate.
You sort of want to know who is backstopping it... but basically the company its being refinanced at 20p. All institutions behave differently but for most its somewhat dangerous to sell shares you receive in the placing before you actually get them. This won't be confirmed until after the open offer.
Existing shareholders can sell shares to raise funds to cover what they anticipate taking up on their holding at the record date.
By raising £15m... borrowings fall to £7m. They say for the year 2022 they expect debt to be 0.9x EBITDA. Quite an interesting comment. If we assume EBITDA is £10m... so debt £9m... and drop another £2m cash, getting back to normal. Or do they mean EBITDA will be £8m and they lose no further cash?
At 25p... that would appear to be 4x EBITDA. This morning pre announcement - you had £17m mkt cap... £22m debt as stated... presume falling to £20m in year 2022. So this morning it traded on 2022 EV/EBITDA of 3.7x.
At 40p the EV/EBITDA = 6x.
It goes without saying it will all be about trading from here and whether the £10m EBITDA June 2022 forecast holds.
Its worth being aware that with 150% of your market cap being available to sell at a decent profit once the open offer finishes... upside in the very short term might be limited by an overhang to sell.
Yes Primary Bid need to address the ISA situation.
from Primary Bid's website:
Can I make investments through PrimaryBid via my ISA or SIPP?
Unfortunately, you can't invest SIPP funds via PrimaryBid directly, but there are a couple of options.
One of our partners Jarvis has started replicating our offers on their websites allowing their customers to participate using funds in their accounts, including SIPP and ISA accounts. Their sites are ShareDeal Active and X-O
https://www.primarybid.com/faqs
I have not used this service.
disclosure: I hold Jarvis Securities (LON:JIM)
Here is a response I got from Primary Bid when I asked them could my allocated shares be put in an ISA or SIPP... there does seem to be a way round it which I will attempt when I get my shares... Otherwise, maybe sell and then buy back again in the ISA or SIPP?
""Unfortunately, you can't invest ISA or SIPP funds via PrimaryBid directly, but there are a couple of options.
One of our partners Jarvis has started replicating our offers on their websites allowing their customers to participate using funds in their accounts, including SIPP and ISA accounts. Their sites are ShareDeal Active and X-O
We are in negotiation to extend this type of arrangement to other brokers and we will announce those as and when they get agreed. The other alternative is to buy the shares from us with a debit card and transfer them to a dealing account for the same broker where you hold your ISA. You can then do a "Bed and ISA" (or “Bed & SIPP”) where you sell the shares from your dealing account and then immediately buy them back with the funds within the ISA or SIPP. There is however a tax liability on any gain and probably costs incurred from your broker for dealing.
Please let me know if you have any further questions.
All the best
Kerry""
Good morning all. Sorry if this question seems obvious, however I'm green to the stocks and shares world and today's news on Revolution Bars (LON:RBG) is the first time I hold a share that offers Open Offers to existing shareholders. Can anyone provide information as to how I can take advantage of this? I assume I need to contact my existing broker, or should the offer appear in my online account at some point later today? Thank you in advance.
Primarybid - I have successfully participated in 2 fundraisings recently. ORPH, where Cathal has suggested they should have allocated more - the offer was closed by 8.15am. And AVCT, where the company did increase alocation. That closed sometime early afternoon. So it does work if you are quick off the mark!
The problem with Primarybid is that you cannot buy inside a SIPP or ISA. So you have to deal in cash and then transfer your shares into a dealing account in order to sell them, with the relevant tax implications.
I was amazed how quickly the Avacta offer closed Melody9999. Didn't get a sniff even though very keen.
how fast did the shares appear in your broker account and was that process smooth?
Thank God you’re here Paul to help with the placing info on £RGB like mother duck
Morning Paul, what a shame RBG are not offering shares to retail shareholders through Primary Bid don't you think?
I think it's more important that RBG is offering a generous Open Offer to existing shareholders.
I've heard that the problem with Primary Bid is that for the decent fundraisings, they're sold out in minutes, with apparently the market makers grabbing them! So it's not really working as planned.
Yes I was once in the middle of a Primary Bid application....and it takes about 30 seconds to complete if you are all set up....and they closed the offer. My screen froze as a result. This was FOUR MINUTES after I received the email advertising the offer. Primary Bid usually put out an offer just after the 4.30 pm bell but last night they waited until 6.20 pm. I have set up an alert on their mail because they are also now starting offers at 7 am. I understand they have a long waiting list of companies looking to raise new money. So far this week there have been 5 separate offers. I am sure that is a record for PB and I doubt they could cope with too many more....although I would not bet against another offer tonight or over the weekend.
One unusual point on the Revolution Bars (LON:RBG) fundraise is that shares purchased through the placing or the Open Offer won’t be available for trading until late July - this seems to be allow time for the delisting and AIM admission. Therefore this placing should not attract very short-term flippers.
Good point, thanks!
Positive update from Gamma Communications (LON:GAMA) this morning. With Covid-19 would seem to be in a good place given their product technology. Plenty of cash on balance sheet despite recent acquisitions and further cash generation claimed. Also deserve credit for not using government schemes. I suspect too many businesses are exploiting these schemes when there is no real need. The Times newspaper seems to be on a campaign to unmask (pun unintended) the culprits. Interesting to hear thoughts on £GAMA.
Interesting to hear thoughts on Gamma Communications (LON:GAMA)
Good company in the right place at the right time. It's also now moving into Spain where there's a very low level of cloud comms penetration.
Basically any company at the moment that's increasing their dividend is signalling their strength to the market. Refusing to take government help is another strong signal. Gamma's just provided both of those in one update.
What's not to like?
timarr
Fully agree.
Gamma Communications (LON:GAMA) is a company i've followed for a while and today's update has convinced me to take a position. Their approach to the government schemes here and in Spain was a real signal of strength.
I noted that their growth target for the next few years is around 12% for core business but this seems a little timid and they have a track record of overdelivery.
What's not to like indeed.
A fourth vote for Gamma Communications (LON:GAMA), one of only four full positions that I currently hold. I'm curious as to why the market hasn't reacted quite so enthusiastically as I did this morning upon reading the trading update.
Thanks Tomhurst1 and others for your comments on Gamma Communications which I have held for many years. I would highlight the high ROCE, the decent profit margins, high recurring revenues, the relative insensitivity of its business to the economy (so far), low exposure to consumer whims (being a BtoB business), the large number of customers (not over-reliant on a few clients), the significant past growth and the considerable prospective growth arising from its position as a relatively small company in a very large European marketplace. Throw in its increasing exposure to more people working at home and I can understand why you took a position today.
I am very tempted.....but one of the NEDS has sold off something like £5,000,000 shares in the last six months.
Just published, David Stevenson: COVID investing. David writes for the weekend FT, The Adventurous Investor column. A name given for his 'outside the box' thinking, and here, he doesn't disappoint. He's bearish on current markets. Bearish on oil. Bullish on alternative energy. With his own investments, he managed to get out end of January. Bought heavily in March, and as of 2.5 weeks ago is 50-60% cash. (He tells me, in normal times he trades very little!) He's very well informed, and a man worth listening to.
Eloquent, enjoyable, and forthright views, which makes you think. (Also find the podcast here).
Next week's webinar 11th June, 1pm, we have Robin Griffiths giving his views on the macro picture. Robin was highly recommended by a listener. Robin uses proprietary research which combines technical analysis, economic cycles and behavioural factors, to guide investors, to help them time their (longer term) decisions. He will have views on markets and the economy. Robin is co-editor of the Dynamic Investment Trends Alert. Register via this link, which has Robin's full bio.
Finally, if you like Investment Trusts, we have Tr Property Investment Trust (LON:TRY) webinar on Tuesday 9th June at 5pm. Tr Property Investment Trust (LON:TRY) trades at a 12% discount to NAV. Has a 4% yield. A property IT in more robust sectors. (Reg Hoare mentioned in his excellent ABC to Investment Trusts). Register via this link.
It was a really interesting session, appreciated his transparency and views, thanks for organising.
Hi Tamzin - I missed the Panoply webinar, are you planning on publishing it on the website at any point? Cheers and thanks for all your hard work providing a really useful resource.
Morning all, I just tried to sign up to Primary Bid and can confirm for those its relevant to that you MUST be UK resident... otherwise its not working Im afraid.
With regard to placings and pricing... I'm afraid it is a dark art. Generally I would say that institutions limit orders if they believe they influence price... they are either a top ten shareholder already or put in an order for 10% or more of the placing. Often when an institution manages to dictate the price they find they are corner stoning it which they may or may not be that happy to do.
Smaller orders were always ranked with strike orders sitting higher in the queue than a limit. If its going well you want to be in at strike to do best. Often, the price is nudged up at the last minute. Very few brokers would give an indication of likely strike other than agreed ranges that were officially announced.
Whilst in general institutions with a large percentage of a company will be on the same side as other shareholders... the percentage of their portfolio is also very relevant. They will be very motivated to protect their own performance. A large percentage of a small company might still be very small to them and this can be to the small investors disadvantage.
If I hold spread betting long position in RBG am I entitled to apply for 3 new shares for each 5 existing shares (or equivalent in case of spread betting)?
Yes. I have confirmed this with Spreadex. They reflect what happens with the physical shares, so spread bets will be entitled to take up the open offer. You would need to speak to your spread bet provider, to make sure they do so, as the default option is for them to do nothing. Often they email clients who hold a position in a company that is doing an open offer.
Paul,
Thanks for reply. I hold long position with Spreadex.
Revolution Bars (LON:RBG) - justification for the move to AIM is to enable quicker and cheaper fundraisings - I guess shareholders now know what to expect in the future.
It's primarily to speed up this fundraising, and avoid a load of unnecessary costs (from having to issue a prospectus). But yes, it will enable quicker & cheaper fundraisings in future, if needed, e.g. for cheap acquisitions. Isn't that a good thing?
My morning smallcap tweet: Revolution rescue remedy
Revolution Bars (LON:RBG) M P Evans (LON:MPE) Volution (LON:FAN) Somero Enterprises Inc (LON:SOM) LSL Property Services (LON:LSL) Xpediator (LON:XPD) Gamma Communications (LON:GAMA) Yew Grove REIT (LON:YEW)
Revolution Bars Group (RBG) £15m placing & OO at 20p, a 42% discount to reduce debt and possibly re-commence refurbs. Also will move to AIM from full list. I hold.
M.P. EVANS (MPE) covid has had little effect on ops. Prices hit but still above year ago. Crude palm oil recently improved to $600 cf $659 pre covid.
Volution (FAN) May sales outside UK at 91% of pre-covid. UK at 42% in May and better in June. Op Cashflow positive throught.
Somero (SOM) further precautionary actions to reduce costs due to uncertain outlook. Guides net cash end June over $24m, as before. Sales 25% down on pre-covid plan but co remains profitable and cash generative. I hold.
LSL Property Services (LSL) Q1(Mar) op profit up 62%. Seen 'encouraging initial activity levels following easing of lockdown'.
Xpediator (XPD) CEO kicked down, remains on board as Founder.
Gamma Communications (GAMA) Growth in SIP Trunks and Cloud PBX seats has continued to be positive. Cancellations of existing contracts are at normal (minimal) levels, no inc in bad debt. Sales cycles lengthened in Q2. Will pay div.
Yew Grove REIT (YEW) expects to collect at least 95% of Q2 rents.
Morning all, expecting some nice dilution on my Bidstack (LON:BIDS) holding this morning. Interesting concept, still a ways to go towards meaningful revenues. Update from Somero Enterprises Inc (LON:SOM) on COVID 19 and is taking further measures to cost cutting including furloughing 20% of staff and cancelling bonuses for the year.
I should add the dilution will be a result of the expected placing that happened yesterday.
Morning Paul,
Looking forward to your commentary this morning. Your views and delivery are always thought provoking and you are one of a kind (in a good way).
As an aside today is Friday 5th, not Friday 4th, although that might make things more interesting too!
Ooops, thanks Michael, I shall correct it now. I'm a bit dyslexic when it comes to dates!
Paul I am interested in ESG and SRI investing with a small cap slant, pretty new here was wondering if you had any thoughts or have you covered this before?
I agree with Tony. Yesterday I listened to your interview on piworld. It was very informative and interesting. Also reading your views give me an insight to what’s going on out there.
In general I find your comments very helpful.
Saying that. What happened with ZOOM yesterday. I didn’t expect that. Lucky I had my stop on.
A lot of tech stocks in the US have really shot up over the last month. I would expect naturally there will be some pullback. A lot of interesting ones I have been looking at that would benefit including £DOCU £TWLO and £TDD
Paul...Even before you publish, later this morning , your general commentary thoughts are priceless and if no one else has said this...listen...you are far better than you realise at what you are doing , and the perspective you are providing is priceless to us guys here...Your daily thoughts are not available anywhere else and please keep them coming ....I find them invaluable in setting up my thoughts for the day..Thank you again Paul
Thanks Tony! I'll keep that in mind whilst watching RBG plummet today!
Oh dear, down 25% as I type.
Paul as for RBG..The fundraising whilst not brilliant for the share price in the short term, surely this now guarantees survival of the business in the long term...it may not be a 5 bagger etc etc but with the uncertainty of liquidity now gone, for long term holders this for me , is looking like RBG are going to get the time they need to deliver post CV ,what they were doing quite well before...and is potentially looking like a reasonable long term hold in a sector that’s going to be bombed out.. I worked as a banker in the meltdown in the hospitality sector in the 1990s ..after the boom lending years of the late 1980’s .....we micro managed all our pub and hotel customers who had in their minds ,lost their life savings in pubs and hotels that simply had no customers....we had some brilliant operators....we turned off the interest ...and customers were always looking to us for answers.....and the question so many operators asked was ‘Tell us what we have to do to get through this ?... Answer..’Make sure you are still in business with the lights on when it’s over , because it’s only those businesses that are still open that will thrive ..because the customers will return...When those customers returned those business we helped that through the crisis, went booommm....and we offloaded good neighbouring pubs where the owners simply gave up to those who refused to give in...Of course it needed the support of the bank but in the long term the banks losses were reduced and our operators expanded with our help...Quid Pro Quo...Nat West are now getting some support for their excellent support to RBG during the crisis...Perhaps I am wrong but RBG is going to survive.