Well, we've been stuck in the never-never for the past four months or so, and in the mean time shareholders have had no shortage of occasions to count the rafters, scan the horizon for clouds, or perhaps reminisce on the trials and tribulations of stocks past.
I had a flashback of that nature the other day, thinking back many moons ago to the plight of another company in which I was a shareholder.
What triggered this flash from the past was an old article on the ABC site that I stumbled across while scanning the internet. The predicament of the company that was the focus of the piece has a certain ring of familiarity to it:
... Commentator Tim Treadgold says the company's plight will be causing pressure.
"It is always very frustrating for shareholders when they have put their money into a company and they can't get out of that investment," he said.
"Basically you've got 10,000 people that have money in a company and they can't sell and they can't get out. It is extremely frustrating.
"There will be a lot of pressure from a number of sources.
"disallowed itself will be bringing pressure on the company to get on with it, major shareholders will be banging on management's door saying 'just get on with it' and management itself will be finding it extremely frustrating."
The above commentary from Treadgold could easily be about Phoslock in 2021, however the stock he was referring was Galaxy Resources, and the year was 2014.
Apart from the extended trading halt, there are more than a few a similarities between Phoslock and Galaxy back in the day.
Galaxy at the time had a rather eccentric Managing Director, which wouldn't be an unreasonable description of a recent MD of Phoslock. Galaxy, like Phoslock, also had enjoyed 'stock-star' status for some time prior the the suspension, with the share price surging on a wave of enthusiasm, only to plunge in the years leading up to the trading halt.
Both Galaxy and Phoslock came unstuck in China, where Galaxy aimed to establish a manufacturing facility (Galaxy today is regarded as a mining stock, but up to 2014 the primary focus of the company was on establishing a plant producing lithium batteries for electric bikes: had they succeeded, Galaxy today would no doubt be seen as akin to an 'Australian Tesla').
Indeed, Galaxy even had a director by the name of 'Zhang' at the time of its suspension in 2014. I suspect these days he might be a tad worried about getting confused with the recently departed Phoslock director who shares his name.
In the wash up, the Galaxy share price managed to escape its downward funk towards the end of 2015, thanks to the combination of a falling Australian dollar and a rising US dollar denominated lithium price. Today, the Galaxy share price is approximately 24 times what it was when it was at the 'rock bottom'.
They were lucky to survive, though, because the company was loaded up with debt. And indeed, this is one of the major differences between Phoslock today and Galaxy several years ago.
Looking over Galaxy's Annual Report for 2014, an examination of the company's balance sheet indicates that at the time of the trading halt, Galaxy's liabilities almost equalled the value of their assets.
By way of comparison, looking at the most recent figures for Phoslock, the half-yearly report released on 26/08/20, Phoslock reported liabilities worth some $7 million and assets worth some $60 million, with more than half of the value in cash.
Taking all of this in, it does strike me that Phoslock today looks far more 'ship-shape' than was Galaxy in the wake of the extended trading halt of 2014.
Now that it is looking as if Phoslock might have avoided the 'worst-case scenario' with respect to its operations in China, the company should be able to keep the wolves at bay.
That said, I am not sure if the China story is likely to draw in much new blood in future, and the company is probably going to need to look elsewhere for a catalyst to kick-start the share-price. I can't see institutional investors rushing into a stock that has been in a trading halt for months, at least in the short term.
Fund-managers tend to be image conscious, and most will probably run away from any stock with the whiff of scandal about it. And of course, the recent China tension is one other factor that muddies the waters for prospective investors.
All things considered, the China story has gone stale, and for the share price to enjoy a sustained rise, there needs to be another angle, something fresh that grabs the attention.
One development across the Atlantic that I've been paying attention to lately has the potential to resurrect the share price of Phoslock, though it depends of course on how a few variables pan out.
As reported by Bloomberg late last year, the Chicago Mercantile Exchange, in collaboration with Nasdaq, launched the Nasdaq Veles Californian water index at the end of 2020, and as a result, water will join gold, oil and wheat as a traded commodity in the US for the first time. This effectively allows farmers and traders to hedge against or bet on water availability in California.
The new water market is linked to the $1.1 billion spot water market in California, which is the largest agriculture market in the US. The index is based on sale and lease contracts in the state's water market.
The last price recorded on the index was around $500 per acre foot, though judging by conditions in California at time of writing, I'd say that the price is set for a rise soon.
The launch of this product last month prompted concern from the United Nations that the new water futures could spark a bubble in the vital resource.
Others take a more somber view, pointing to the complexities of the California water situation, with a web of laws and regulations governing water usage in that state.
That said, In light of the record-low interest rates at the moment, it isn't to hard to imagine that there might be some substance to the concerns expressed by the UN.
The question is, if there is a surge in the California water futures contracts, is this going to flow on to other listed water assets?. And if so, could the Phoslock share price stand to benefit?.
Given that the new management seem to have reoriented the focus of the company to the North American region, it isn't hard to imagine that US based market players might notice this stock, and perhaps perceive Phoslock as a proxy for the Nasdaq Veles water index.
Thus, it might be worth keeping an eye on that water index. If it starts to soar in the months ahead, that potentially could feed into the Phoslock share price, especially if Phoslock co-currently gains traction in the North American region.
Often, over-hyped stocks that fall from favor never recover, tumbling into penny-dreadful oblivion. However, occasionally such stocks regain the luster of former days, and eventually see their share price climb to new highs: Galaxy Resources is an example of such a stock, which managed to hit an all-time high in early 2018, less than four years after the trading halt.
Phoslock today looks to be in a more solid position than Galaxy in their downbeat days, and so I'm not really sure why the Phoslock share price couldn't follow the trajectory of Galaxy. As described above, there is a catalyst that has the potential to draw new buyers to the stock, although of course the the findings of the yet-to-be-released audit investigations and the conduct and performance of the new management will also influence sentiment towards this stock.
(20min delay)