I took a small loss, but will recover it quickly enough in other investments.
My reasons for selling, are based on further research, and not just the half year report.
Long term, I think the stock has a (slim/modest) chance, but my assumption is that money could be sitting here for years with very little movement either way, and very little return.
Firstly, before the IPO, DUR owned 40% of Entech, an engineering company that was doing well, with good profits. But instead of Bringing that investment into DUR for the IPO and for shareholders, the owners of DUR, who owned all of the 40% Entech shares, decided to Sell Entech and award themselves a whopping 16 cents per share dividend each, which amounted to millions of dollars each as a dividend, and a massive cash collection, and Exit event, and money making event, for the owners, before the DUR IPO.
At the DUR IPO they transmitted the expectation of dividends, and yet at the first half yearly they granted No dividends.
Secondly, at the DUR IPO, the directors cashed in millions of their own shares, selling them to IPO recipients at 50 cents. This was the second "Exit" or "Harvesting" event that the former company owners undertook and massively profited from, and how the company directors, used this to make millions of dollars for themselves.
After all of this, I questioned their motives, and lack of commitment to shareholders, because none of them had any experience at running a publicly listed company and being beholden to the influence of shareholders.
I'm wondering if the IPO was set up just for them to cash out two massive events, two exit events, two harvesting events, in which they could make many millions each, without any commitment to shareholders or to growing the business. So now they have had their financial exit events. They built a private company, and in discussions amongst themselves, and with brokers, probably decided on what the (personal financial) optimum way is for them to make a killing, and so they took the IPO route, and so they harvested from the public.
Thirdly, they decided to Dilute shareholders at the IPO to such a degree that there was never going to be any real growth within a near future. They awarded themselves far too many shares, and after already creating for themselves, two very lucrative Exit opportunities, they created a third by dilution. There is no way this new company should have listed with 230 million shares out, at the most it should only have 85 million shares out, but my concern once again, was the excess Greed of management, and share dilution, making any dividends (if or when they come) largely worthless. Most IPO company small caps list with under 100m shares, and many of them are only at 20 cents, these guys listed 230 million at 50 cents, with the directors Transferring a lot of their own shares into the IPO, and making millions Once Again.
My concern still is, that they have no prior experience of running a publicly listed company, or with doing anything for the benefit of (unseen) shareholders.
The best thing for this company now, for growth, is if they turn around and buy Entech outright, but I'm not sure that will happen now that the DUR former owners, and now company directors, have sold out of Entech and given themselves a whopping dividend in the process.
And even if the plan was to buy Entech at some stage in the future, using shareholder funds and not their own, they would have to raise those funds, so dilution would once again go through the roof.
I think this will become a stagnant stock, year on year, with poor dividend yield, when they eventually get around to offering a dividend. I think the whole purpose of the IPO was for the former owners of a private company, that they have built up, with lots of hard work, it must be said, to use 2 or 3 primary Exit events to cash out and make their fortunes, leaving shareholders and the market in a state of ambivalence and debt. So I sold out.
I may be right, I may be wrong, but these are my reasons, and are individual to me. The companies I reallocated the funds to, have directors that have previously built up multiple publicly listed companies, and have great experience in the space, and great reputations. The quality and experience of management is everything.
Had I have been these Durotec (private) company owners, what would I have done to publicly list the company and show good faith with (future) shareholders, and give those shareholders greater hope of good solid returns?
1. I would have shown a proactive public face to the public listing of the company.
2. I would have kept the 40% stake in Entech and brought that into the DUR IPO listing, distributing the dividends to shareholders, rather than to themselves.
3. I would have kept my shares in DUR and not sold millions down to investors in the IPO.
4. I would have listed only 85 million shares in the IPO (or only had 85 million outstanding after the IPO).
5. And instead of diluting new shareholders to the tune of 230 million shares, I would have tied bonus shares to director and future company performance, by granting shares based on future performance. This would have shown confidence to future investors, and a commitment by directors to rapidly grow the company, which appears sorely lacking here now.
None of these things were done !!!
Good luck to those who remain, and remember, these are only my opinions now, from my new research, and I'm sure there are others who will differ.
Gw
Expand
(20min delay)
