LON:PMG | The Tom Cross Phenomina - Too Frothy!

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11th Nov '10 by tingtang

77 comments 26172 reads

Is there a rational explanation for paying the present circa 10p for these shares?

What are purchasers seeing as value, when the NAV is probably 3p or less? With no licences and no kitty, so they had better get started with massive fundraising whilst the SP is still up there or the dilution will be eyewatering.

I have never seen a greater premium for expectation. Surely there can't be that number of 'Irish Grannies' out there!

tt.

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Tingtang

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77 comments

funkfeet

4th Mar '11

Parkmead is a share that many people believe in as Tom Cross has a proven track record. He drilled 20 successive wells back to back once and was nominated for an award as best CEO not so far back. Oh and his last little company sold for £18 a share. Almost forgot that.

Since taking over at Parkmead he has brought over 2 Dana colleagues, then he brought Aupec (who have government contacts within the Oil industry all over the World). Other members of Dana are leaving to join or so the grapevine has it and they (Parkmead) are about to release the RNS everyone there has been waiting for. To share holders what the company has been preparing. Remember thousands of Dana share holders also followed Mr Cross from Dana.

I am under no delusion, it will be, as is the share to have got to where it is already, a media frenzy. I would bet my house on the fact that as was the case with the BOD changes RNS that sent it flying upto 40p (which was pale in comparison) this will again fly. Speculators say this could happen anytime now and news is imminent. A 30p spike north to me would be putting it mildly, even if it is only for maybe 48 hours.

djpreston

4th Mar '11

Funk

The messianic belief in TC is quite something to behold. Yes, he did a decent job at DNX and made quite a return for his followers (though not the PR 40000000000% return, or whatever it was that TC claimed the kindly elderly investor made - odd how he's never acknowledged that error - all good for the mythology though.

Facts are facts. No matter how good TC and his team are, the shares, even now, stand at a massive premium to NAV. Obv a deal is needed but how to fund it? Can't see a vendor taking paper equally can't see a funding issue anywhere near current SP.

Whatever happens though, it'll be interesting to observe (from the sidelines in my case).

AnonymousUser858

4th Mar '11

"...He drilled 20 successive wells back to back once..."

What does this mean?

Is it supposed to mean 20 successful wells? as in 20 successful wells back to back? If so the statement is completely incorrect and totally misleading.

And it is factually incorrect to state that Aupec was acquired after Cross took the helm. It was acquired more than a year earlier (I lack the motivation to check the precise date). It was the Aupec acquisition that resulted in Cross being made a non-exec - so almost the inverse of the story told by Funkfoot.

I am one of those who benefitted from Dana's success, having bought at 10p old money (ie before the 15:1 consolidation) and I've been sticking up for TC for more than 10 years. But this kind of sub-literate, inaccurate, ramping claptrap is simply ludicrous. It does not help investors in any way.

loglorry

4th Mar '11

Funk you keep buying and if it does get to 30p on media frendly I'll be happy to sell you some more short. If you have to bet your house to raise funds then please do so. When the bubble bursts and you are homeless then don't come crying to us as you have been warned.

Log

peterdm

4th Mar '11

Don't think it was 40000000000%, actually. She was an Irish granny and probably invested during the time Dana was quoted on the Irish stock exchange. Didn't they trade at 1-2 Irish pennies during that period? And exchange rate could also have had an impact. Maybe it was just Tom Cross' "Liam Byrne moment".
Parkmead seem to have generated 2 extremes, those who think it will be an overnight sensation, those who are totally dismissive. But Cross has done this before (built a £1.8 bn company virtually from scratch), and if he builds another Dana over the next 13 years (period I held) then I would be happy.

peterg

4th Mar '11

Parkmead seem to have generated 2 extremes, those who think it will be an overnight sensation, those who are totally dismissive. But Cross has done this before

Yes TC has done it before. I'm not totally dissmisive of Parkmead, at a sensible price it might be interesting given TC's involvement, but at current prices it's trading at an large multiple of its likely NAV on the basis of the TC factor alone - that's simply not good enough for me. I held Dana for years, and did well out of it, but I have no illusions that TC is any sort of company making god - he made some good deals over the years but as a Dana shareholder I also had a number of criticisms of him. Sadly, my idea of a sensible price is probably not far over 10% of the current SP. So all current holders should hope that I never end up investing!

AnonymousUser858

4th Mar '11

"...Didn't they trade at 1-2 Irish pennies during that period? "

No. We've been through this before - several times. The period when the alleged Irish alleged Granny allegedly bought some alleged shares in Dana was when the shares were listed in London and at a price significantly higher than the 1-2 pence implied by the apocryphal story.

The story referred to mentioned a return of 1800% which, given the sale at £18 clearly implies a purchase price of 1p . Dana shares did not trade below 5p and that low was only momentary. The typical price paid at that period was 8p. ( I paid between 8-12p myself)

But the major inaccuracy in the mythical story is the omission of the 15:1 consolidation which occurred a few years later. This meant that every 15 shares bought by the granny were traded in for a single new share.

So she did not buy at 1p and sell at £18. She actually bought at 5p (at the very best), then consolidated at 15:1 then sold at the equivalent of 120p per old share. In other words she had a 24 bagger.

Which is very nice thank you but a far cry from the 1800 bagger claimed so incorrectly by those who fabricated the original story and those who insist on repeating it despite being informed of their error.

I note that the people who insist on peddling this kind of inaccurate urban myth show no interest whatever in checking their facts. They do not seem to understand the value of accuracy in considering investment decisions.

AnonymousUser858

4th Mar '11

There is, I suppose, another explanation for the erroneous story. The shares in question had a nominal value of 1p. That had/has nothing whatever to do with the share price or the price paid by any investor to acquire a share.

I suppose it is just possible that the originator of the story did not understand this basic fact and imagined that a share denominated as having a nominal value of 1p did actually cost 1p to buy.

If that is the case then the originator stands exonerated of dishonesty and is merely guilty of the lesser offence of ignorance

loglorry

4th Mar '11

And let's not forget PMG has already almost 24 bagged so TC has done as well as he did all those days at Dana in just a few months - or maybe just maybe things are a little overvalued?

Log

peterdm

4th Mar '11

The point of the post was actually about the extreme reactions TC and Parkmead seem to spark - lol! I don't give an 'aporth about the granny, actually, whether the return was 1800% or a 1800 bagger, which are slightly different things, I think. And I did try to check Dana's performance on the Irish stock market, but couldn't find it easily, although I remember currency fluctuations between the £ and punt during the 90's when Ireland was in the ERM, and I travelled regularly to Dublin. And I don't know how the transfer from Dublin to London was effected, either. But I did buy Dana at 8p in 1998, topped up regularly, including parking the money from the sale of my London flat in 2010 at £10.88 per share.
Every investor will have their own approach. Every company has its life cycle. The risk-return equations will be different at different times. Bought Dana after an article in Mail on Sunday (along with Paladin). They sat alongside Glaxo, Astra Zeneca, Reckitt and others. And I'm now holding some Parkmead in a similar way (currently 5 bagger, I think). We'll find out what TC's plans are over the next few months, he must have known where things were going with Dana and had some contingency plans. That doesn't mean he walks on water, it's just fairly basic business sense.

AnonymousUser858

5th Mar '11

"...I don't give an 'aporth about the granny, actually, whether the return was 1800% or a 1800 bagger which are slightly different things, I think. ,..."

NO NO NO NO NO

Do try and keep up - it's really not difficult

1800% is not "slightly differerent from" an 1800 bagger - one is a hundred times bigger than the other - that's not a slight difference.

peterg

5th Mar '11

We'll find out what TC's plans are over the next few months, he must have known where things were going with Dana and had some contingency plans. That doesn't mean he walks on water, it's just fairly basic business sense

Granted, TC has fairly basic buisiness sense, and possibly a bit more than fairly basic, but how does that justify the current valuation - there are loads of execs out there with more than basic buisiness sense, and, thankfully, a lot fewer companies with minimal history trading at 10X their assets.

funkfeet

6th Mar '11

Facts are facts

Dana drilled more than 20 wells in Russia, all successful and most costing under $10,000 - loose change in oil industry terms - and Dana struck a partnership deal with Russia's largest oil company, Lukoil, which ensured it was producing oil within a year.

http://www.business7.co.uk/insider-magazine/current-issue-feed/2009/07/19/oil-gas-profile-tom-cross-dana-petroleum-97298-21531023/

AnonymousUser858

8th Mar '11

Funkfeet

the wells drilled in Russia were production/development wells - not exploration - so of course they were "successful" - but that is entirely unremarkable for stripper wells drilled on land on well established producing fields.... it implies nothing whatever about the skill/acumen of Dana management

and they were not drilled by Dana - they were drilled by Dana's Russian partner - or to be precise by the Russian sub-contractors used by their russian partner

and they were drilled back in the mid/late 90's

and the Russian assets proved to be a serious disappointment which never achieved their potential

and Dana eventually sold them off cheap and fled the country

Somebody somewhere is spinning a rather mundane story so that instead of it coming across as the undoubted let down it was in reality it is presented as a great success.

I have been a very long term supporter of Dana and made a very solid 25 bag return on them over the years. But that does not stop me recognising and being honest about their imperfect track record.

emptyend

8th Mar '11

But I did buy Dana at 8p in 1998

....so...that is 120p in terms of the later numbers you quote....£10.88 etc...after allowing for the consolidation that some proponents appear to conveniently forget. I bought in 2004 at 220p - and have no complaints. But I don't delude myself into thinking it was anything more than a gain of 718% over a 6 year period.

Parkmead has a massive amount of hope in the price - far more than appears to be deserved at this point, given that no deals have been done and no finance has been raised.

loglorry

8th Mar '11

PMG have announced jobs for a bunch of high level management. All the jobs are ex-Dana employees. Market reaction pretty good up 9%. I've shorted some more. I don't see how this helps them raise money or realise assets. It just means any placing will probably be bigger and the salary bill has just mushroomed. How much to keep Dana going now in salary/expenses alone say $10m/year? They have done precisely nothing in the last 5 months since TC took over other than increase the salary bill.

I'm sure these guys will make a formidable team but they still need to raise some cash and it won't be at 23p.

loglorry

8th Mar '11

It will be interesting to see at what sort of levels the new employee are granted options. I can't imagine they would have left Dana without a decent options package and I can't imagine the strick price would be much higher than low single digits.

All extra dilution on top of the 600m shares in issue.

Log

peterdm

8th Mar '11

ee.
Yep, the original investment was a 15x at end. The £10.88 in 2010 was 66% over a few months. Both were ok for me. I'm not a TC hagiographer, but I think he's a good businessman on the basis of what he did with Dana, and can't believe there wasn't a forward plan for developing, particularly in the North Sea - the insiders will probably have had some indications regarding the intentions of BP, Exxon etc. But in the end we got £18 for Dana, when TC reckoned it was probably worth c30% more.
My points originally were about the extreme reactions TC gets, good and bad. I am personally bemused by the irish granny, whether she exists or not, I remain happy with my Dana and Parkmead investments, and having been mis-quoted myself in the press and shredded in a radio interview, I don't get too excited about what I read in the papers. But somebody buying Dana at 6p (which you could get) would have been 90p in "new money" and by my reckoning that is a 2000% return, or a 20 bagger, but I am beginning to doubt myself reading through some of this stuff.
The other point I was making was that different people have different approaches to investing, accepting that we are all seeking to make money. Personally happy to hold a "high risk" share in a mixed portfolio, the "spare change" from Dana went into Parkmead, the (main) stuff in ISA went into SOCO. I thought about selling Parkmead when it was intra-day trading at c40p, but it's just not my personal style (and I got it wrong with some others including Dana at one stage).
The news today that TC is basically re-assembling the Dana team is positive I feel. It means that relations with KNOC must be ok, these guys will have had hefty restriction clauses in their contracts, and can only go to Parkmead at this stage with the blessing of KNOC. That opens up some interesting future options, and I have no worries whatsoever about Parkmead raising money for acquisitions, or where the share price goes in the short term. Dana's share price fluctuated wildly, and they had their fair share of dusters, nevertheless, it remains an investment with which I was very happy, and if TC repeats this with Parkmead I will be equally happy.

emptyend

8th Mar '11

somebody buying Dana at 6p (which you could get) would have been 90p in "new money" and by my reckoning that is a 2000% return, or a 20 bagger, but I am beginning to doubt myself reading through some of this stuff.

No - those figures are definiitely correct.....perhaps give or take the spread. I could have bought Dana at 6.25p (94p)ish in 1999, but bought SOCO at 30p(7.5p) instead.

But the point that was made by someone is that the rise in Parkmead to date is more than discounting a repeat performance ....and I think that is a very valid point!

loglorry

8th Mar '11

Yes ee I made that point about the TC effect having taken out pretty much all their future hard work already. The stock is off up again this afternoon so I might be able to increase my short for the second time today.

I wonder what the options grants particularly the strike prices are were like for these new execs? Strange this wasn't disclosed.

Log

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The Tom Cross Phenomina - Too Frothy!

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Tingtang

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