Two Tier Stock Market
The stock market is of course divided between the blue chips and the rest, who do not have the ability to walk on water during boom and bust. Coverage of the stock market is also equally divided, with the slick mentions in the mainstream media, versus the myriad of websites and social media by journeymen players.
There are also two tiers as far as bull and bear coverage of stocks. Given that one is not allowed to leak price sensitive information on the long side, coverage, even in the most obvious situations, has to be couched even if there is say, the obvious prospect of a takeover. The law is very strict on bullish inside information, and those who breach this can end up very quickly like the rioters we have seen in the past week.
However, on the short side one can apparently say almost whatever one likes, whether knowingly false or not. This particularly applies to small caps, who normally do not have the research reports or the legal muscle (money) to fight back. It is also the case that it is very difficult to explain to the ordinary person in the street what shorting is, so therefore getting legal redress is almost impossible. Of course, the bears are fully aware of this, so their targets are hardly ever blue chip stocks. It is easy to push on the open door of the minnows, with defamation, distortion, omission and character assassination. One can scare punters out of small caps far more easily than fund managers and institutions out of blue chips.
Georgina On My Mind
We have been in full bear mode as far as the small caps since the pandemic bubble ended in H1 2021. Since then the market has been characterised by an exodus of companies, and a dearth of new listings. To be frank, we need all the new companies on the market we can get, and they need all our encouragement. As I have stated before, it is therefore all the more pleasing that the likes of Helix Exploration (HEX), European Green Transition (EGT), Rome Resources (RMR), and Georgina Energy (GEX) have all been successes in their initial dealings. Georgina is particularly pleasing given that it was third time lucky as far as the raise to get the company to market, and the shares have traded as high as 19p after listing at 12.5p after the RTO just a few days ago.
Unfortunately, given that this is a small cap, and has done well since coming to market it is prime fodder for the bears. They must be truly upset and frustrated at the success of the deal, and so the typical playbook is rolled out: the random mix of fact and fiction, the distortion of the fact, the omission of the positive and generally conflicting all the information at hand in the worst way possible. All of this amounts to a re-run of Project fear on a target company of the kind last seen over Brexit, the pandemic, and climate change. What we also tend to see in such situations is the bears relying on the evidence of those with an axe to grind against a company: it may be sour grapes, jealousy, or simply delusion. No matter, if it suits the negative argument, bring it on even from a source with no credibility. There is no balance, no “one the one hand, one the other hand”, just anything to get the share price down. And the beauty of it all, if the bears are wrong, there is no right of reply, or sanction. They just go quiet and move on to the next victim
What the bears often forget to acknowledge is that these days the due diligence on public companies, the auditors, lawyers, accountants and regulation, is intense. This means that they are put through the wringer again and again, and on an ongoing basis. Indeed, this is a massive deterrent to even the best private companies coming to market.
As far as Georgina is concerned, whatever its pluses and minuses are, they have been fully aired: the farmins, the permit situation, the drilling risk and the redevelopment opportunity. The £14m market cap already has all the negatives priced in. Otherwise like the recent broker note price target from Oak Securities, the market cap would be several times what it is currently. The bears can huff and puff, exaggerate /distort and try and instigate a market maker inspired rug pull. But to paraphrase Donald Rumsfeld, we know all the unknowns at Georgina, and this makes the stock much cheaper than its peers.
Wildcat Wildcard
I have covered the long and winding story of Wildcat Petroleum (WCAT) on several occasions. The good thing is that even though the big win for the company in South Sudan is still apparently waiting in the wings, news this week from Savannah Resources (SAVE) could be the trigger for the re-rate in WCAT that its fans have been waiting for. Savannah Energy announced on Wednesday it has terminated the planned $1.25 billion purchase of Petronas’s oil and gas business in South Sudan. For those familiar with WCAT who know that the company has already passed the government’s due diligence, it could be concluded that it is now the only game in town if SAVE is out of the game. At the very least, with a £5m market cap, and the shares only just off their lows anyone looking for an asymmetric risk situation, might feel that rather like Panthera (PAT), this is a situation to run the rule over.
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