Hi drp55,Sorry I took so long to reply, I've only just noticed...

Hi drp55,

Sorry I took so long to reply, I've only just noticed your post. I sold my adacel holding not long after my last ADA post. I sold not because I saw problems ahead for Adacel, but because I saw the global financial crisis coming.

I bought my holding for an average price of 27c a couple of years ago, and sold for an average price of 48c. I expect Adacel to post a stellar full year result this year and next year, and it was always my intention to buy back in for (what I expected to be) a sub 20c price when macro economic environment started to settle down again. However, despite my expectation of solid results over the next 2 years, I have not bought back in for four reasons. First, the share buy back artificially inflated the stock price during the worst days of the financial crisis, so ADA never fell back to a compelling entry level relative to other bargains around in the market over the last 5 months (e.g. instead of slightly cheap ADA, I could buy ridiculously cheap stocks like BTA for 30c or ETC for 22c). Second, because of the long term buy back, there are no longer adequate volumes being traded, and the timeframe it would take to build a decent position (or exit a position) is now unreasonable. Third, because the only real buyer of adacel now is management via the buyback, it is no longer a naturally trading stock. I.e., the share price is no longer discovered by a true market, but more or less determined by Thorney and ASX buyback regulations. Fourth, and finally, I suspect that the reason Adacel management are happy to soak up all the free float with this never ending buyback (apart from prohibiting potentially large percentage losses in their own holdings) is that they think they will be able to find a buyer for the whole company in the not too distance future. Indeed, the only way that the top 20 shareholders are now ever going to realize any gains in ADA is through a complete buyout by a third party. However, I'm not confident that a buyer for the whole company is going to emerge in the short or medium term. So those with large holdings in ADA are now more or less stuck.

Summing up, because the FY09 and FY10 results should be very good, ADA is still worth a play if you are comfortable with very small trades. If you are an investor, or a trader seeking larger value trades, however, then Adacel is one to avoid for the reasons I described above.