08/07/2023

If It Moves

The Ronald Reagan quote of if it moves tax it, if it keeps on moving regulate it, and if it stops moving, subsidize it, is to quote a cliché, the gift that keeps on giving. In this case, as stated previously, the City has over the past 30 years had the full hit of the first two parts of Ronald Reagan’s quote. Now that key companies are choosing to list elsewhere, such as Arm, those who have been living off the Golden Goose of the City for so long are concerned that their gravy train is grinding to a halt. The CEO of the LSE has pointed out the “seeming indifference in some quarters” to the current dire state of affairs in The Times this weekend.

Listed Companies

Alas, “some quarters” have always been anti-success,  anti-money (now anti-elite), and over-regulation has been the weapon of choice. But leaving these shores is only a part of the issue, many private companies who might have thought of listing are certainly not going to, and asking around, it is clear that many listed companies are wondering why they bothered in the first place. Apart from the odd newspaper article, there is currently nothing and no one on the horizon who seems to change this state of affairs. Even worse, anyone who might do so, is unceremoniously blocked or sidelined. Those who delight in negative headlines and the downfall of others (in a bear market this is not exactly uncommon), seem to still hold sway. But it should be remembered, one of the main drivers of the economy, and the source of cash for the NHS / welfare state are growth companies. There is little point in complaining about austerity, if you are against the people who could help end it.

Brian Winterflood

It was clearly not a week to remember as far as the small cap space, which mirrored the decline in the FTSE 100. Indeed, the blue chip managed to serve up its lowest close for 2023. Perhaps a little alarmingly, while the FTSE Small Cap index is some 10% off its 2023 peak, at around 6,000, one might be worried that it could be headed towards the October floor at 5,700. However, the index levels are not the whole story. The real casualty of the stock market in 2023 has been liquidity. Those who have read the obituary of the late, great, Brian Winterflood may have noted that during the 1974 stock market downturn he set up an antiques shop to supplement his income. One might imagine that one or two market makers may currently be contemplating similar moves.

1973 vs 2023

In fact, the similarities between the early 1970s and the early 2020s do in quite a few ways seem more than coincidental. My memory of financial / political matters stretches back to 1973, especially when LBC radio was founded, and I listened to it on the way to school. In many ways with the inflation battle, especially the energy price shock we are back in that time. All that is left now is a secondary banking crisis, and property crash. The militant socialism of that time has been repeated in the persistent sadistic strike action we have now, and of course we are being taxed in a similar fashion.

Quadrise / Vast

Getting down to the nitty gritty of what we have seen during the week, and it has been interesting that one or two companies have apparently not realised that if you are trying to raise cash you do it in June rather than July, just as later in the year you do this in November rather than December. Presumably, Quadrise (QED), and Vast (VAST) had their reasons.

Helium One

There were also one or two awkward RNS announcements this week. Helium One (HE1) was having issues with a delay in signing a non-binding Letter of Intent with SOFORI. Given that a non-binding LOI is by definition not exactly the most onerous of deals, the market was not too impressed. The shares briefly dipped to 4.5p, close to the 3.75p they started the stock market on at the end of 2020. It may be that the 5.1p Friday close suggests that some in the market think that there is value in a stock which was 28p a couple of years ago.

Emmerson

With shares of potash miner Emmerson (EML) investors were served up the kind of googly that Shahid Afridi would be proud of. The announcement this week that environmental approval for the Khemisset project was to be referred to the national level from the regional level represented a bolt from the blue. This was particularly the case given that at least a few in the market were expecting a full green light to the project this week. One does wonder how a Kafkaesque planning process helps any jurisdiction, especially the ones that could do with the massive economic boost, which in this case Emmerson’s project will deliver. At least Shard Capital’s research note out yesterday seems to have steadied the EML ship for now. So would the idea that moving approval from regional to national level could mean the project is actually fast-tracked or even rubber stamped. Obviously, this is what bulls of EML will be hoping for.

Caspian / Touchstone

On a happier note we greeted the return of Caspian Sunrise (CASP), where last month’s warning on suspending dividend payments, was a good way of kitchen sinking the situation ahead of this week’s 2022 results swing to profit. It was also good to see Touchstone (TXP) rise against a falling market, as it announced a share purchase plan. Normally these days such moves which are obviously a positive, are brushed aside by the market as a manufactured attempt to underline value in a stock.

Xtract Resources

It was pleasing to deliver a bear trap call on Xtract Resources (XTR), ahead of the company’s well received Q1 Manica Concession in Mozambique. This strong production update may go to change the perception of Xtract in the market from being primarily being an explorer to be a bona fide producer. The miner said that gold production was up to 4,522 ounces at an average of $1,895 per ounce. The shares ended the week up nearly 30%.

I3 Energy

Speaking of share purchases, production and bear traps, it may be the case that we have been treated to a bear trap at i3 Energy (I3E). 2022’s intraday low for the independent oil and gas company with assets and operations in the UK and Canada was 12.5p. At the end of last month they briefly touched 11.88p. This week they closed at 13.1p, perhaps as the market remembers the recent director share buying, and of course the dividend payout, which is still in the mix. The shares were trading at 19p as recently as early June, and ideally should be rebound back to that zone, at which any concerns regarding commodities prices are more than factored in.

Of course, bear market or bull, the interviews on ZaksTradersCafe continue. Highlights in this respect were Powerhouse Energy (PHE), with its new waste projects strategy, SPAQ Ashington (ASHI) with its tech / AI focus, and the Amazon Natural Spring Waters raise.