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On 22nd April 2016, 88 Energy raised A$25m (£14m) through a placing of some 715 million shares. This was an increase to total the number of shares in issue by 22%. 88 Energy took delight in informing us of the ‘high calibre of the proposed investors’. I have highlighted the parts from the RNS on that day:
88 Energy went even further by specifically mentioning institutional investors:
Let me ask a question, what does the phrase ‘institutional investor’ mean to the typical private investor? Are you picturing BlackRock, State Street or some other ‘high calibre’ long term investor? Did you think ‘Great! If these guys backed this placement then that should give your typical private investor some confidence right?’
So why then in the four months since the placement have we seen no ‘TR-1’ forms filed as RNSs? The share capital has increased by 22%, you would therefore naturally assume that if any institutions had taken part and retained their holdings then at least one would have surpassed a 3% holding, whereby a TR-1 should be filed. A quick check of the shareholder register (Source: 88 Energy Website) confirms my suspicions:
Top 20 Shareholders as at 13th May 2016
|Rank||Name||Balance||% of Total Units%|
|1||HARGREAVES LANSDOWN (NOMINEES) LIMITED||276,948,113||7.11|
|2||BARCLAYSHARE NOMINEES LIMITED||238,282,131||6.12|
|3||HSDL NOMINEES LIMITED||201,774,421||5.18|
|4||HARGREAVES LANSDOWN (NOMINEES) LIMITED||185,512,950||4.77|
|5||HARGREAVES LANSDOWN (NOMINEES) LIMITED||172,012,530||4.42|
|6||TD DIRECT INVESTING NOMINEES (EUROPE) LIMITED||170,569,345||4.38|
|7||HSDL NOMINEES LIMITED||115,265,654||2.96|
|8||HSBC CLIENT HOLDINGS NOMINEE (UK) LIMITED||91,418,190||2.35|
|9||INVESTOR NOMINEES LIMITED||88,304,241||2.27|
|10||TD DIRECT INVESTING NOMINEES (EUROPE) LIMITED||82,519,208||2.12|
|11||SHARE NOMINEES LTD||77,535,063||1.99|
|12||INVESTOR NOMINEES LIMITED||73,687,281||1.89|
|13||NATIONAL NOMINEES LIMITED||51,697,564||1.33|
|14||J P MORGAN NOMINEES AUSTRALIA LIMITED||51,575,912||1.33|
|15||CHASE NOMINEES LIMITED||46,703,299||1.2|
|16||JIM NOMINEES LIMITED||44,827,954||1.15|
|17||CITICORP NOMINEES PTY LIMITED||43,022,753||1.11|
|18||ELOTEN GROUP LTD||40,000,000||1.03|
|19||CHASE NOMINEES LIMITED||36,546,860||0.94|
|20||LAWSHARE NOMINEES LIMITED||34,264,399||0.88|
The major shareholders are all nominee accounts, i.e. private shareholders using a third party broker.
So using the terms ‘high calibre’ and ‘institutions’ looks to me like nothing more than PR guff. The ‘institutions’ that took part in this placing, which was at a 14% discount to the share priced on 22nd April, i.e. 1.90p placing vs 2.20p market price we must assume to have flipped their subscriptions straight into the open market. I can’t see any evidence of intuitions in the top 20 shareholders, note ELOTEN GROUP took place in a prior placing and appears to be a BVI registered vehicle
The questions I have therefore are: 1) Were PIs suckered in to buying based on ‘institutional investors’ to support the share price whilst these ‘institutions’ flipped the stock? 2) Did 88 Energy have awareness that those taking place in the equity raise were flippers? 3) If so why did it use the misleading language above? 4) Why were existing shareholders not able to participate in this discounted issue through open offer?
I actually like 88 Energy as a company and I believe it is probably one of the best speculative resource stocks on AIM at present. CEO Dave Wall comes across well and there is an exciting news flow due over the next 12 months.
I’m not going to give an overall verdict on this stock but it would be nice to see a much fairer and clearer approach to 88 Energy’s next fund raise.