Hi all, I have been a pretty hard head following SGH up from its...

Hi all,

I have been a pretty hard head following SGH up from its 20s to 50s and then from its recent peach of 60s to 6c, still held on until I saw the Recap Plan, wasn't sure how the market would respond after the initial fuss, but experience tells that this will fall further.

Thanks to Nick's (or Grants, so sorry I always tend to get the two of you confused) figure on the debt reduction, basically the current DFE for 95-96% dilution means about 7b shares being written, and at around 5-6c each. I think once the DFE is being completed, the SP will tend to gravitate towards that price. And this prior to the GBP250m being converted to shares if Watchstone don't succeed (even if we do, I don't know where the money is going to come from...) Hence, I finally sold out today and took a loss of 74% of my initial investment of 87k.

Need to make some money back else where ...

However, I will keep watching this space, as I think there will be a big jump when Watchstone case settles, if the news is good, no doubt there will be a big jump. But the lesson learnt is (based on the Intelligent Investor by Ben Graham) to sell out at the first jump at such risky stock that's underperforming, as it will take a long time for the stock to recline back up to its formal glory.

I was too hasty in concluding SGH's ship will be turned around alright last year, and I think there might be a good chance to see some improvements this year. But if not, the risk is waiting for another year... the odds don't stack up now, maybe as many suggested, it might be good to come back in after the DFE.

If the DFE deal don't come to fruition, the recent announcement had involuntary administration and liquidation on the table, the notice also prohibit SGH searching for a third party to buy out the debt... hence our options are quite limited. If the shareholders refuse, which I think I will if I have to vote, then potentially we get nothing. A more reasonable deal with 95% dilution is to allow the senior lenders to take the GBP250m from Watchstone case without the option to swap them into equity, if we fail, the convertible note pretty much means it's 99%+ dilution. Which mean the SP would fall toward 1c ish.

Anyway, will keep watching and see how things turn out.