some ruminations on the investor roadshow

Why would a Company which is supposed to be busy running it's operations AND engaging in discussions with multiple bidders be conducting a Investor Roadshow ?

Is it a backstop for fundraising purposes ? Or a corollary ?

The fact the share price is dropping certainly makes it look like that is what may be planned as 'natural buyers' exit the market leaving the share price to drip lower.

This is a good article from a UK tipster who used to work 'promoting' companies prior to placings and thus he would seem well placed to 'read the signs'.

http://www.advfn.com/newspaper/tom-winnifrith/13733/spin-amp-bullying-sure-signs-of-a-placing-on-the-way

As private investors we have come to loathe private placings. If the shares are 10p before City fund managers are made insiders they are 8p by the time a placing is completed as somehow word seeps out. Odd that. And so the placing is done at a 20% discount to 8p and a stock which you were paying 10.25p a week ago is suddenly being offered to institutions only at 6.4p. It is not as if the fund managers are any more likely to be long terms holders than you are. They will spiv the shares out at 8p given half the chance and so boast of a 25% return in 2 weeks.

What makes the process so much more infuriating is that the companies and their advisers deliberately attempt to drive the share price up ahead of the placing by getting private investors to buy just ahead of the start of the institutional road show. So you guys overpay just so that the starting price is 10p ( and end price 6.4p) rather than 9p (and 5.6p). Fair? No. It really is nauseating but there are some warning signs.

On the spin tack.

1. The house broker will normally be prohibited from publishing research just before a placing. So watch for a raft of notes from “independent” research houses such as Edison and Hardman.
2. The CEO will do a raft of interviews with folks like Proactive Investors and in resources present at Proactive or Minesite or similar forums.
3. The PR folks will call in favours and you will see the shares tipped in magazines and puffed up in certain parts of the press.
4. There will be a string of upbeat RNS releases. Most companies that are loss making seem to issue an RNS once a month with good news anyway. But when it becomes even more frequent than usual watch out.

Score three of four on this checklist and then do your maths – is the company likely to need cash within 18 months? If so the placing is on its way.