OK, time to chime in. I’ve been quietly following PIL’s progress since March due to my interest in Fintech and South East Asia. These threads have become tough to read, there’s a lot of disappointment and talk of manipulation, hand-in-glove-action, ASX/ASIC reporting and so on. To be honest, I think the truth is actually quite obvious - and to my mind doesn’t involve so much of the dark arts as it does the obvious. Back in early April, when the SP was 3.2c, I raised some concerns about the size of the register, with Shares on Issue (SOI) at 4.1 billion; see here: https://hotcopper.com.au/posts/52243651/single. Any concerns about large SOI were batted away by BBM (now
@Capitain-Obvious) who was evidently quite bullish at the time. However, in my opinion, a company that doesn’t keep its register under control is flying a big red flag. There’s a few reasons why, which should hopefully be quite obvious even to retailers. Here’s a handful:
- With minimal revenue coming in, the only way to keep the company lights on is to either Cap Raise or issue options. With billions of SOI, either option is very dilutive and hugely weakens existing / LT shareholders. According to the most recent 4C, in the 12 months to date, PIL spent $1.99m on “staff costs” and “admin and corporate costs”. That’s more than they brought in through cash receipts ($1.92m) across the same 12 month period... BEFORE counting other expenses made too. Never mind trying to run a lenders book, this tells me just to keep the lights on, they will need to continue issuing options, or will need to raise capital. Think honestly about what that does to the SP?
- Since my post in April, the SOI has gone from 1.4 billion to the current figure (per MarketIndex) of almost 1.7 billion. As everyone will be aware, that’s because cheap options got executed, the last ones at 1c (if I remember correctly). Given the way the SP is going, it appears to me that those who are getting these cheap options are likely selling them in a short space of time for a quick profit. Again, this simply drives things further south. Sure, there’s one top 20 holder who’s been telling HC they are long term holders (fair play to them too), but worth noting the T20 holder list has changed a lot since the last edition. 'Lithium Lover' (clearly the same person as a HC poster on these PIL threads) was on Twitter saying how great it was that additional T20’s had added to their pile, but what was also evident was there were 8 new entrants to the T20. In other words, eight others fell off too. Seems not every ‘big player’ is holding or accumulating for the long term.
- There’s lots of talk on both here and Twitter about “cappers” and “manipulators” and “accumulators” and all the usual malarky one sees on retail favourites when the price is going the wrong way. Again, I think the answer is pretty obvious. Given PIL’s market cap is only around $22m to $25m, if someone meaningful was actually accumulating, as various PIL Twitter pundits have been telling you for months, then surely at least one “Becoming a substantial holder” notice would have been triggered. After all, to own 5% of the register would ‘only’ require $1.25m. That’s pocket change to big fish, institutions, fundies etc. Yet not a single one has appeared. So who is accumulating? Really, the answer should be easy to find. Why is there no broker data being posted on PIL? Surely one of you holders knows another HC punter who you could ask very nicely to run the numbers for you – say over the past month. That will tell you without a doubt who has been the net buyer and the net seller – whether it’s been the Retail brokers (Commsec, SelfWealth, CMC Markets, etc) or the insto/soph brokers. Retail investors generally don't have the means to 'cap' or 'manipulate' the price. If you really think some big player is manipulating the SP, the broker data will help tell the story.
- The other problem that a ballooning register creates is sell pressure. This is evident even from some of the recent posters here, who are quite openly telling others they’re hoping for a pump up so they can exit. Again, more sell pressure, even on good news. Additionally, ‘Lithium Lover’ posted some data on Twitter back on 22 April 2021 (and on HC around the same time) showing that 3.5 billion shares had traded around the 2.95c mark. The point being made was that this demonstrated the SP, at 2.5c at that time, was undervalued. Look, it might be true – everyone’s welcome to their own opinion – but going off the stats Lithium Lover provided, all that tells me is that if those shares haven’t been sold, they’re being held by people who are now 55% underwater. That just creates more selling pressure, even if great news breaks. Personally, I was expecting a pump when the license news broke, followed by "sell the news" event. Strangely, there was no pump - perhaps patience has worn too thin.
These, in summary, are the reasons why registers with billions of SOI can be such a problem. Whatever news/progress the company might release, the size of the register isn’t going to change (unless they do a consolidation). It’s a risk you have to live with. Don’t ignore it, or (worse), make excuses for it
“someone is driving it down to accumulate” etc. I just don’t think that’s realistic on any microcap with a market cap sub $50m. How many big funds/players would even be allowed to put money in a company that size? Anyway – this is all just my opinion and my own judgment after following the stock for the past 4 months. Don’t make any buy/sell decisions based on what I write, I’m just sharing it to try and even out the discussion a little. These threads have become far too conspiracy theorist for my liking. Don't be sucked in.
Good luck,
m
