I haven't posted much here over the past couple of years, and...

I haven't posted much here over the past couple of years, and didn't really feel much compulsion to do so, given the stock's limbo status. But in light of the curveball announcement at the end of last week, it would appear that I have lost my excuse.

I figured I may as well take advantage of this strange public holiday, and make some token effort to contribute to the discussion around Phoslock's sudden re-emergence.

I was watching the dramatic share price movements last Friday, and at the end of that eventful day, I leafed through the share market tables in middle of the fin review, trying to look up the stock particulars for PET, but without any luck.

It wasn't just Hotcopper posters who'd given up on Phoslock, or so it would seem.

It is easy to wise-up after the event, of course. Personally, I had been sitting on the fence, unsure as to whether Phoslock was going to be able to emerge from the abyss.

My caution was partly influenced by my past experience of stock-watching. Over the years, I've noticed that when listed companies enter extended trading halts, more often than not, it doesn't end well.

One example that I couldn't help but call to mind was a company that I  followed several years ago, called American Patroit Oil and Gas.

What intrigued me about this compan was that the MD, Alexis Clark, had previously worked as an industry analysis in the years prior to taking up a position at the company, and I was familar with his work.

As such, I followed the operations of the company with interest for some years. At one point, I recall a contact of mine who worked in the oil industry sent me a message, indicating that he thought the stock was a potential winner.

Fortunately, I didn't pay much heed to that particular tip, as things didn't end well for the stock.

In early 2019, American Patriot was placed into a trading halt, due to some complexities in relation to a recent capital raising. I assumed it would be a minor issue that would soon be cleared up, but it wasn't to be: the suspension continued to drag on, and the company eventually wound up in the delisted scrap-heap.

The fact that a company run by a respected oil and gas analyst, and apparently highly regarded by some who worked in the industry, wound up in such a situation really highlights just how perilous a stock suspension can be.

A more obvious example, and in some ways more comparable to Phoslock, was the stock previously called Isignthis, now Southern Cross Payments. Like Phoslock, this was a market-favourite in 2019, and both also subsequently wound up in extended trading suspensions.

Today, Southern Cross is still delisted, still frozen at the same 1.07 price it was at when the 2019 suspension came into effect . As I understand, late last year they had plans to relist on a European stock exchange under another ticker code, but after having a quick look for it, I couldn't find any evidence for that it was actually trading on this exchange.

All things considered, Phoslock shareholders today are certainly in a much a better position than the unfortunate holders of Isignthis, even after accounting for the considerable (but probably inevitable) share price drop since Friday.

With all of the above in mind, there is one pointed question that probably needs to be mooted.

How did Phoslock manage to defy the odds, bucking the suspension blues, in contrast to the experience of so many other stocks that get caught up in the cobweb of an extended suspension?

Earlier in the year, I spent some time pondering if Phoslock had some points in its favour, that might differentiate from the other companies that had failed to escape a similar predicamant.

Upon reflection, I thought there might be one factor that could work in their favour.

Maybe the re-listing was partly reflective of the skills of the Phoslock legal team, as someone suggested. I also don't doubt that the management put considerable effort into getting the bus back on the road. However, I don't think either of these sufficiently explain how Phoslock was able to defy the odds. I suspect the predominant reason was more fundamental.

When you are trying to get a handle on a stock, it can be instructive to take a step back, and try and explain, as simply as is possible, exactly what it is that a company actually does.

So applying this test to PET, what is it that this company does?  Basically, they run a factory that makes a special kind of glue.

That description is an over-simplification of course, but not dramatically so. Phoslock (the product) is basically like a glue that binds up phosphorus. Of course, the application of the product is not so straightforward, requiring some experience and know-how to apply effectively.

However, at the bare-bones level, the operations of the company are fairly straightforward. It's a glue-factory.

Their core business isn't a tangle of intangibles, like many tech-stocks, nor are they dealing with imperceptible assets tens or even hundreds of metres underground, as with resource stocks.

Basically, I think the simplicity of the Phoslock business model was the main reason that they were able to extract themselves from the suspension mire.

While I was pondering the above, there was one quote from a certain famous investor that I couldn't help but call to mind in relation to the Phoslock situation:

...invest in companies an idiot could run, because one day, one will...

If you consider just how few people were being employed by the company prior to the suspension, and how unprofessionally the outfit was being run, it is actually surprising that Phoslock managed kick as many goals as they did.

Having said that said, while I think Phoslock has managed to surmount a significant hurdle, I wouldn't want to appear to be suggesting that this is the time for complacency.

The road ahead will likely be a rocky one. Looking to the next twelve months or so, I think there could be two major risks for shareholders in this company.

Firstly, as with a patient leaving hospital after suffering a stroke, companies exiting extended trading suspension face the real danger of a relapse.

I remember one company a few years back called Consolidated Tin, which managed to escape from an extended trading halt only to eventually end up being frozen again, and ultimately, ended up being delisted.

I don't think the aforementioned company is exactly comparable to Phoslock, but all the same, Phoslock will be walking a tightrope for a while yet.

The second danger is the possibilty that the share-price will get caught up in a death-spiral.

As other posters have commented previously, it is quite likely that the PET shareprice will be under considerable pressure over the next several months, with trapped shareholders who have been wanting 'out' over the past two years eager to exploit any share price rebound.

There might be some signs of this already: Last Friday, for example, the shareprice surged to above 0.100 just over twenty minutes after opening, but by 10.31 it had dropped back below the water-line.  It look less than ten minutes for the share price to get whacked back below the ten cent mark.

That might indicate that this could represent a pretty formidable ceiling for the share price over the months ahead.

Hopefully, more buyers might start moving into offset the sellers, but it is something of a catch-22 situation: are buyers going to be keen to jump in knowing that there might be plenty of holders still looking for the exits? That suggests to me that the share price decline might continue for several months.

More likely than not, I think Phoslock will shake off the doldrums, and rebound after several months.

However, there is a real danger that the share price will spiral ever-downwards, down into penny-dreadful territory, and if they fail to extract themselves from the nether-nether, it could lead to a capital raising at rock-bottom levels and a blowout in the number of shares outstanding. That would almost certainly lead to a share-consolidation, which is never good news.

If that sounds overly morose, before winding up, I might add that my intention is to continue to hold on to a position in this company.

What informs my decision here is a near-death experience I had with another company, Galaxy Resources, almost a decade ago.

At the time, the company had a lofty ambition to create a vertically-intergrated lithium company, and loaded up on debt to achieve this objective. But it all almost fell apart after a terrible industrical accident at their plant in China, which left the debt-laden company in a perilous position.

While I thought the company still had great potential, I was somewhat demoralised by this turn of events, and unsure whether the company would prevail, I decided to hedge my bets, selling off half my shares in the company.

I thought that decision was the right one at the time, and still do.

Fortunately, the company did manage to endure, and last year it merged with another company, Orocobre, forming a new company called Allkem. That small position in Galaxy is now worth just over thirty times what it was ten years ago.

I don't know if things will play out as favourably for Phoslock in the years ahead, however, I do see at least some similarites between the Galaxy situation ten years ago and that of PET today.

For now, we can only hope that the company is able to exorcise the ghosts that haunt it, so that the company can finally achieve its potential.