Shanta Gold – Placing Complete, PI screwing all done – Now we Plebs can and should buy

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And so the screwing of Private Investors in AIM listed gold miner Shanta Gold (LSE:SHG) is completed. The company has today announced that it has raised $35 million (£21.8 million) in its bookbuild placing announced yesterday at 17p. The new investors will own 38% of the equity. We plebs have been rogered, we feel sore but an objective look at the investment case still leaves the shares as a buy. Here is why.

© Image copyright orkla

A brief recap of an episode which for, all sorts of reasons, smells like a mackerel’s rectum. In the days leading up to yesterday’s announcement of the book build shares in Shanta fell by 15%. Some folks in the institutional investor community knew what was going to happen, it was in their interests that the stock fell ahead of the placing and it did.  Coincidence? Methinks not but I doubt anything will happen.

And so with the shares weak anyway, the institutions were able to screw Shanta on price and grab 38% of the equity at just 17p – an 18.6% discount to the price before the placing was formally announced. So that would be a discount of 35% to the price before folks were “made insiders” and knew about the deal… and the secret started to emerge minutes later. Private investors just had to lube up, watch from the sidelines and take what was coming to them – big dilution. It is all very painful and unpleasant and, frankly, wrong. But it always seems to happen that way.

Now, the morning after what should investors do with the shares now trading at 17.75p? The proforma market cap is now £79 million.

The investment case is pretty much as I explained yesterday HERE

The company’s lead property New Luika is now operational and should chuck off £37 million a year starting in calendar 2013. So the market cap is just two year’s cashflow.

I would continue to value the company at £255 million on a sum of the parts basis. But would risk weight that for a number of reasons. None the less there is clear upside. To reflect the fact that the placing was a tad greater in size than expected I have tweaked my target price from 39p to 37p but that is pretty much a base case. And at 17.75p the shares are very cheap indeed. Once again, through gritted teeth, the shares are a buy.

To read the full buy case and valuation metrics outlined yesterday click HERE

 

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Comments

  1. Jesvar says:

    T1ps recommend ‘Sell’ and cut your losses !!!!!
    I agree with you.

  2. Jesvar

    I cannot say that I susbscribe but I am sure that it is high quality analysis from a highly experienced team.

    Tom

  3. Bob says:

    Tom

    Cold comfort for those that bought on your ‘buy’ recommendation just 31 days ago at 29.25p.Keep up the good work.

  4. Bob

    I was wondering where you had gone to. No comment on the S&U post or indeed you still not commenting on SPA where ou bashed me for saying a buy at 2p a month ago and now 4.125p.

    I had assumed the medication was at last helping you cope with your obsessive behaviour. Guess it is time to up the dosage again.

    Good luck mate

    Tom

  5. Bob says:

    Tom

    I’m sure if I had made one factual error about your past recommendations and profit forecasts you would have sent a solicitor’s letter off or got Clem to remove the post. Until then I shall continue to offer a balanced view of your tipping performance against your own.

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