London 0 Oman 1
Given the way that Bloomberg announced this week that London has fallen below Oman and Malaysia in the IPO rankings, it is perhaps the case that I should be writing about what is going on in Muscat or Kuala Lumpur this week. However, this is perhaps not quite my expertise, or my demographic. Instead, as the year end draws to a close we were hit by Ashtead (AHT) leaving its London listing for the US (a total of 88 leavers so far this year), and a former LSE (LSEG) CEO, over whose watch the LSE’s decline accelerated, telling us how bad things are in the City. Thanks for that.
Well of course they are. In no particular order, LSE ownership of the London Stock Exchange, stamp duty, compliance, audit, legal and accounting costs, National insurance, income tax, CGT, IHT, live prices cost, the elite reputation of the City, closed shop financial journalism, insider trading, shorting, concert parties, corporate governance, ESG, diversity, MiFID I and II, pension fund investment, all need to be redrawn before all but the strongest decide not to remain private. The whole thing is wrong and the polar opposite of the Tell Sid 1980s era when traders might be making £5,000 a week keenly trading the market for themselves or their employers. The heady mix here means that the 21st century London stock exchange has headed downhill in the past 25 years, a mixture of deliberate, and unintentional intervention. Ironically there are still plenty of people enabling the decline, while saying they are doing the opposite as you would expect anyone with anti-capitalist leanings. A particular bete noire of mine are the journeymen service providers, whom companies continue to use…
Speaking of anti-capitalist leanings, we find that the UK economy shrank 0.1% in October – even before the kamikaze budget for growth at the end of the month. Not wishing to make the Liz Truss mistake of surprising the financial markets, our customer relations expert Chancellor Rachel Reeves and the Prime Minister warned us that the cost of fixing the £22bn black hole would be painful. Any entrepreneur with sense left the country on fears of a tax hike. Many more will and should follow. After all, why bother in the current environment unless you can’t leave because you kids are at private school, or you cannot afford to leave. It is interesting that the Labour government is happy to raise taxes to get rich people to leave, but not lower them in order that the less well off are forced to leave. They are nothing if not kind to working people, and the quarter of the population who are too sick or unable to work. However, what our current Labour regime seem to have been playing on is that few under 60 remember how bad the last time this particular socialist experiment went in the 1970s. That is why we had Tony Blair’s New Labour. Like the stock market though, they will have to hit rock bottom and bust the country before any U-turn is forthcoming. In the meantime, denial, double talk and false assurances will have to be swallowed ahead of higher taxes as growth shrivels.
Phoenix Copper
Just for a change, and perhaps a new feature given the state of the stock market, I am looking at some of the week’s fallers, and perhaps those who remain of unsung hero status. First of these has to be Phoenix Copper (PXC) where the market continues to enjoy not giving the AIM-quoted USA-focused base and precious metals emerging producer and exploration company, the benefit. Instead, it is obsessing over the $80 million corporate copper bond subscription, originally announced on 15 May 2024, of which an initial tranche of US$5 million was drawn down in June 2024, and what may happen next. Last month the company said it remains in discussions with a number of other potential bond investors in order to ensure appropriate financing is in place for exploration throughout the Empire mineralised district. It also said it remains confident that remain confident that additional bonds will be placed (one can imagine the Nomad was cold watering this as much as possible). At 5p, down from 24p in May, the market cap is now £9.4m, so it is an option money share price for a company which has a cash runway running into Q2 2025, and has already completed several milestones on Empire towards its first production of up to 10.1 million tonnes of mineral reserves.
Wishbone Gold / ValiRx
A couple of stocks that fell this week which may be of future interest given the latest news were also down this week. The first was Red Setter Project focused Wishbone Gold (WSBN) where there may be positive repercussions from the appointment of Tony Moore, a former leading Goldman Sachs banker as Chairman with immediate effect. One would imagine that things will start to move here, especially if someone with his CV is happy to lend his name to a relatively small company.
Obviously we have seen a flood of pre-Christmas cash calls this year, as every year. However, at ValiRx (VAL) the £1.5m raised by the company included a contribution by CEO Mark Eccleston. CEOs leading from the front at fundraises tends to be a decent signal, even in current straightened stock market conditions. We shall see whether Mr Eccleston can move the dial at the life sciences company.
This weeks risers:
Given the way that Proton Motor Systems (PPS) told us on November 20th that it was intending to leave the stock market by the end of the year, one would not intuitively think that just before the end of the year the shares would be up nearly 300%. Or would you? Considering the state of the company, the only real explanation for the rise would be short covering. Companies that have been covered here plenty of times, on both a charting and fundamental basis are Orosur (OMI) and Orcadian (ORCA), and it is interesting that management at both companies have either pulled rabbits out of hats, or got difficult things over the line. Speaking of rabbits and hats, there was a tangible sense of joy from Sound Energy (SOU) from Executive Chairman Graham Lyon in my interview with him as he revealed the sale of the company’s Moroccan assets for $45m. Helix Exploration (HEX) was another happy interview as the company came up trumps with its latest helium discovery. Although the shares have quite rightly doubled since their IPO, the de-risk of finding the gas, and the promise of much more should focus the minds of the bulls going into 2025, especially given the strong funding position.
Zanaga (ZIOC) was already rising ahead of the announced MOU with Arise, as some traders successfully guessed that news was on its way. The best of the stocks rising on no fresh news this week were Cadence (KDNC), Panthera (PAT), Rockhopper (RKH), TinyBuild (TBLD) and Petrel (PET). Such situations are always of interest as in current conditions few people buy shares, or cover their shorts without good reason.
Explorers
One of the features of the London stock market this year, and not in a good way, has been how tough it has been for exploration companies. This is even when you know the management at the companies concerned are totally on the case. I have already mentioned Scandinavian focused strategic minerals company Metals One (MET1), who a couple of months ago announced high grade intersections in Finland. Also Scandinavia focused is Beowulf Mining (BEM) who last month announced additional grant funding from Business Finland. Given that shares of US focused Guardian Metal (GMET) have risen more than 2x on the prospect of imminent government grants, something which now looks more imminent than ever. Rather like Blencowe (BRES), which has also received US grant funding, the market has not rewarded BEM for the non-diluting funding angle. It looks as the key that cracks the code in current stock market conditions is to go non-dilutive, something that shareholders of EnergyPathways (EPP) and Roadside Real Estate (ROAD) have benefitted in spades this year.
Pulsar Helium
Pulsar Helium (PLSR) should be riding as high as the aforementioned Helix Exploration (HEX), especially as the company has already had its major de-risk discovery in February last year. At the time in Canada the shares were a 5x, and given where the stock is now at 23p, a couple of pence below its London IPO price, one would expect a new phase of positive drilling news to 3x the shares from current levels. Obviously, the company cannot sing its own praises in these terms, but given the lay of the land and the existing discovery, the risk / reward at current levels looks very attractive.
The post The Week In Small Caps: London 0 Muscat 1 appeared first on Zaks Traders Cafe.
