pala-blackrock: what price a takeover?, page-24

Hussy I have no doubt PEN will do a consolidation.

It is a common final step before a spec becomes a non-spec.

I've written on this before and shown evidence that when the consolidation is about a company going through transition out of the spec category, it is a good thing and there are examples that show this.

I wrote about this last time when BLT were about to consolidate on a 25 to 1 basis. Lots of doom and gloom around at the time.

But what actually happened was that BLT did the final raising required to finance its transition, consolidated its shares and came back at a level above the raising. Although it then took time to get rolling, it never went back all the way to the raise/pre-consolidation price. After a bit of patience it is now a very different stock.

Prior to BLT I am aware of MWR which did the same thing. There are others.

I can see that sometime in 2014 as PEN prepares for this transition it will raise significant funds, consolidate its shares and restart as a very different company. You will note that in the time preceding this, and via the final fundraising, its portfolio will change from retailers to funds etc. That also is a common part, and is already happening with PEN.

By the way, if you want to see what that "different company" might look like, look at the Strata Energy website. More fitting of an established producer than a penny dreadful explorer I'd say.


The art with investing in specs is to understand this cycle. Feel free to enjoy the "first" share price spike when a spec looks like it might have something. Then get out for a while because there is a lot of fundraising, heartache, disappointment and dilution ahead. Watch the stock closely while you are out, and if that initial hope becomes a viable prospect you will usually find you can get back in at a good price and enjoy the transition. Don't expect to not be consolidated, don't expect not to be diluted. Just be happy with the great returns you will still get!