The Tom Cross Phenomina - Too Frothy!

Thursday, Nov 11 2010 by
10

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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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
41p
Change
-1.7%
Mkt Cap (£m)
41.3
P/E (fwd)
n/a
Yield (fwd)
n/a



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77 Posts on this Thread show/hide all

loglorry 5th Jan '11 38 of 77
1


Ermmm c'mon guys - you can't have it both ways.

Either they are pulling in big bucks in which case given PMG's almost non-existent asset base they will be a drag on the companies ability to pay them. PMG has no revenues to speak of and almost no assets so can it justify paying these sorts of people what they are worth.

Or these guys are not paying full attention to what they are doing because they are not getting paid enough. In which case why rate the stock so highly because of their status within the company.

If you believe TC is such a formidable force in building companies (and I have my doubts) then he is probably worth paying very well but at the moment that is like putting a Ferrari engine in a banger.

So that all leads to the same old problem which is PMG needs some cash or assets with which to work. This signals dilution to the current shareholders of the 608m shares in issue and a lower share price.

ee - as for opportunity cost of being a non-exec. I assume you refer loosely to your role with AEX. I think it was just a few weeks ago on one of the Soco threads (can't remember which) that you wrote that you though "opportunity costs" were pretty much a myth when another poster suggested that sticking in Soco would mean missing out on other stocks e.g. opportunity cost.

I think also having a close ear with senior management and being able to directly influence the companies direction must surely offset some of the disadvantage of not being able to deal during closed periods.

As for the small remuneration for non-execs - I'm not so sure it is all that bad. I guess it all depends how many hours a month are worked but I've heard of many non-exec's attending about 1 meeting a month for their 20-25K/year. Surely not so bad?

Nice to see PMG heading back down some more today - I think we'd all rather see a market which has some sense of placing a price which represents at lease something close to a companies real value rather than what some fools will pay.

Log

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emptyend 5th Jan '11 39 of 77
3

In reply to post #52071

Why not get the facts rather than making them up?

I've no idea what the reference is to a "myth".

I'll leave you to cosy up to your short position in PMG - I dare say it will continue to work out well.

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tournesol 5th Jan '11 40 of 77
4

"Ermmm c'mon guys - you can't have it both ways. "

Sorry don;t understand what you mean?

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loglorry 6th Jan '11 41 of 77

ee - I think you wrote here :-

http://www.stockopedia.com/content/so-whats-soco-vietnam-worth-excluding-tgd-49397/?comment=75#75

"Opportunity cost" is merely a fact of investment life - there is ALWAYS an opportunity cost. And opportunity costs are always trotted out as a reason for trading rather than doing nothing - but there is no guarantee that one won't be jumping on another interesting-looking train just as it hits the buffers.

where you seem to dismiss the idea of "Opportunity cost" being anything other than brokertalk. However above you seem to think being a non-exec and not able to trade in closed periods does represent some kind of real opportunity cost. Or maybe it only applies when one is contemplating switching out of SIA?

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emptyend 6th Jan '11 42 of 77

In reply to post #52095

I think I'm going to shoot myself. Some people.....

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loglorry 6th Jan '11 43 of 77
2

Tournesol - my point is that if TC are not well paid then by your own admission they should be to be effective. In that case their salaries are a drag on PMG's current cashflow. If not well paid then presumably they will not be focussed on the job. Unless ofcourse they hold stock bought at a much lower level like TC at 1p but not sure his interests are that well aligned with punters buying stock at 35p+ anyway for obvious reasons.

I don't think we dissagree particularly anyway. I was just pointing out again that PMG needs to raise some cash so that these high flyers can get their teeth into something substantial.

Log

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tournesol 6th Jan '11 44 of 77
7

Log

I think we definitely agree on the most substantive points:
- PMG does not have the resources to take any initiatives to develop/grow the business
- a fund raising is inevitable

I think we probably agree that:
- the over-inflated share price makes it more difficult for fund raising to be done
- fund raising is likely to be at a much lower SP than current levels

Where we seem to disagree is:
- I think TC is probably drawing next to no remuneration at present
- I think the recently appointed non-execs are probably being paid very little at present
You seem to think differently - have you any evidence?

I think there are some issues where we have a degree of confusion:
- companies need good execs and good non-execs
- companies at the very start of their life cycle may not be able to pay enough to attract good execs and non-execs on the basis of immediate remuneration - so they need to find other ways of skinning that particular cat
- companies which have progressed to the point where they are well funded, profitable and well advanced along their evolutionary curve should pay excellent remuneration to attract/retain/motivate excellent execs and non-execs

PMG is clearly in the first stage of a re-launch - clearly they can't afford big salaries for directors.
DNX has been able to pay top salaries for the past 10 years and has benefitted from doing so.

I can't see any inconsistency - or having things both ways here. It's just that life is more complex and nuanced than a quick black and white one liner.

In conclusion, I whole-heartedly agree that PMG's share price has left the gravitational pull of the real world and is simply drifting unanchored in space.

However I think you are wrong to have a go at TC, his non-execs and the company for this situation. It's not they who have driven the share price to this level. It's the great unwashed. The buyers of tulip bulbs. I wonder if the fact that you have shorted the shares is perhaps colouring your thoughts/emotions/writings just a little? Remember what's bad about falling in love with a share is the entanglement of emotional connection. That applies equally when we fall out of love with a share. We all need to try and avoid positive and negative emotional influences on our investing.

Just saying.

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loglorry 6th Jan '11 45 of 77
1

Fair enough T I agree with all your points. I suppose I was a little dismayed that TC let some of the stuff printed in the papers about a granny making a return of 1800 times her investment stand. This was clearly an error and he must have known that. One thing it did not take into account was the 15:1 consolodation which took place. To raise this during an interview and get the numbers so totally wrong raised a very big red flag for me with TC.

here is a link to the particular link http://www.telegraph.co.uk/finance/financetopics/profiles/8113069/Dana-Petroleum-chief-Tom-Cross-reflects-on-the-deal-of-the-decade.html where he is quoted on the 1800x figure.

The actual max return was still a staggering 120x from min to max I think and he is to be commended but let's not forget XEL was trading at 3.5p in 2009 and is now close to 400p. These events in O&G do happen and they are largely determined by the drill bit not just good management. Encore 8p to 150p anyone?

I think what TC was doing was trying to paint a great picture so he can raise money which to be fair is his job but the mug punters ran away with it a bit. Letting the 1800 number go to print though was a big error in judgement in my view.

Log

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nigelpm 6th Jan '11 46 of 77
1


I suppose I was a little dismayed that TC let some of the stuff printed in the papers about a granny making a return of 1800 times her investment stand. This was clearly an error and he must have known that. One thing it did not take into account was the 15:1 consolodation which took place. To raise this during an interview and get the numbers so totally wrong raised a very big red flag for me with TC.


Come on Log, this could quite easily have happened - papers often get things wrong - it only takes an couple of extra zeros! TC isn't likely to have checked it in detail and why should he?

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Fangorn 6th Jan '11 47 of 77

Interesting to see a continued downward move...seems the herd is heading for the exit in waves, fearful of losing all their profits...

Keep shorting Log.I want to get some of these at 4-5p/sh tops :)

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cochin 6th Jan '11 48 of 77

Pardon my joining in this discussion but I'm inclined to agree with loglorry. This was an interview conducted with a view to promoting PMG as an investment opportunity, not an informal chat over a pint. Tom Cross will have known precisely what would be appearing in print.

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loglorry 6th Jan '11 49 of 77
3

TC isn't likely to have checked it in detail and why should he?

You are joking Nigelpm? I'd be very surprised if it was not the case that not only TC checked the details before they went to press but also that a lawyer didn't check it over too. Let's be clear here the paper was quite clearly quoting what he said in an interview. Yes papers get things wrong all the time but I think in this case TC let them get it wrong so to speak. He was clearly bigging up his achievements at Dana.

Fangorn - I'm afraid I'm not going to increase my short position and this could just as easily zoom back up tomorrow if PMG make some kind of announcement. I'm short from an average of 27.89p (to be exact) so I'm 25% or so in the money now but I think it will go further below 10p not sure if I'll be around then though depends on news of a placing or other capital raise. I'd consider buying too at the 3-5p mark.

Log

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cochin 6th Jan '11 50 of 77
2

As a former Dana shareholder I looked at Parkmead prior to Tom Cross's appointment as executive chairman but even at 1.62p (19 Oct) I could find no compelling reason to buy. In fact if you remove the Tom Cross factor the company is a basket case. Nontheless there are many, myself included, who would be prepared to buy into the story, at a sane price, as the narrative is potentially taking a new and exciting course.
I think however that it could be a long time before this share trades at a sensible price even after the inevitable dilution and/or gearing that will take place. There are too many Tom Cross disciples out there and it will take a major disappointment or two before the company settles down to a realistic valuation.
Not one to chase in my view.

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loglorry 6th Jan '11 51 of 77
1


cochin - its coming back down to earth fast though so you might get a chance to get in sooner than you think. I expect we'll close sub-20p today. Nothing but thin air below now.

There were people on Advfn posting when the share price was 38p saying that they had made a six figure profit. It is going to take a lot of self belief for these guys to hold on to their shares after the price halving from there. Many I'm sure will be happy to get out now and book a very big profit anyway. The short squeeze is likely over now and the placing must be just around the corner.


Log

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cochin 6th Jan '11 52 of 77
1

loglorry - The problem I have is placing a value on the Tom Cross factor. Buying in at any price seems a straight punt on his ability/luck to spend wisely.
As I said, I don't think its one to chase but of course the rewards could be significant if it succeeds. I'll carry on watching though!

cochin

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thegreatgeraldo 6th Jan '11 53 of 77
1

Notice that David Mills has sold another slug..

Dec 10th he held 9.86%

Dec 24th down to 8.91%

today 6.35%

http://www.investegate.co.uk/Article.aspx?id=201101061630040527Z

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Fangorn 6th Jan '11 54 of 77

This has been the first no brain trade of the year IMV, selling PMG short. But it took balls of steel to do so. Fortune favours the brave eh :)

Didn't engage in such myself but congratulations to all those who did in similar fashion to Log.

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loglorry 6th Jan '11 55 of 77
2

Fangorn it was/is a no brainer but I think the problem was the entry point. I think a lot of shorts were put on pre-christmas when the price was around 10-12p which was way too high. Then with the lack of liquidy (and tiny free float of just 14m shares vs 608m in issue) over Christmas a short squeeze developed pushing the price up to 40p. This caused shorts to run for cover.

I was lucky enough (at least so far) to get my short on higher but I think I could have applied the same argument to short them at 10p. I mean what is the difference between 5x overvalued and 20x overvalued?

Definitely all a bit isane but a bit of fun too and I didn't put any serious money on it as shorting can be very stressful.

The timing of the RNS today is interesting as D Mills is disclosing at the latest possible time it seems and thus obviosly is concious that his sales will knock the price. I'm sure he has been selling more and we'll probably see more RNS's like it in the coming trading sessions.

Still a no brainer of a short at 20p actually but only if you are prepared to see it at least double.

Log

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cochin 6th Jan '11 56 of 77
1

I've been wondering who David Mills is.

http://www.ianfraser.org/corporate-goveranance-abuse-at-parkmead/

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loglorry 7th Jan '11 57 of 77
2

Down another 7% today. I'm up 33% on my short now. Looking at the David Mills saga this doesn't look that great. I'm sure it is all in the past and nothing to do with TC and new management but it doesn't look that wonderful. If it transpires that David Mills gets out of the stock and books an enormous profit on the transaction given the loan business cited above this could make some interesting reading in the papers.

Log

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