Good morning!

The FTSE is down by "only" 25 points so far, meaning that this isn't yet the "Black Monday" I thought it might be. The low earlier this year was around the 6900 level (currently at 6975).

From Patisserie Holdings (LON:CAKE), we have heard of the existence of secret overdrafts propping up the company. The placing at 50p went ahead on Friday with 31.5 million new shares being issued - it could have been so much worse! The pre-existing shares will maintain ownership of 75% of the equity.

I've noted a couple of interesting comments over the weekend. Richard Bernstein from Crystal Amber - who wanted to be part of the rescue deal - has remarked that interest income was suspiciously low, given the cash balance the company was allegedly holding.

Elsewhere, Leon Boros has speculated that bills may have been credited to sales rather than creditors.

EBITDA forecasts for the current year have been slashed by c. 60%. Given that the earnings multiple attached to Pat Val's earnings will also be compressed, we can understand how a 90% discount might have been needed to ensure the success of the Placing.

The shares should come back from suspension by Thursday morning. Putting my optimistic hat on, I think 50p could prove to be a floor for the share price, assuming that the balance sheet is fixed and the chain is profitable (albeit at a lower level).

The problem is that the historic earnings numbers were probably a fantasy, making Patisserie Holdings (LON:CAKE) an inherently speculative proposition at this point. Financial analysis isn't possible with fake numbers!

Bring on the restatement of the accounts.



There are other companies with news apart from CAKE:



Shoe Zone (LON:SHOE)

  • Share price: 185p (+12.5%)
  • No. of shares: 50 million
  • Market cap: £92 million
Shoe Zone PLC (the "Group"), the UK's largest value footwear retailer, reports on trading for the 52 week period to 29 September 2018

An excellent update from this cheap shoe shop. Revenue…

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