what to do., page-2

Ozmarket, on 18 Feb, after the announcement of the resignation of DV and before today's announcement I was the one who was rather contrarian during all the euphoric entries about take overs, mergers and asset sales. I say this not too gloat but to point out that perhaps my thinking may have been correct. On 18 Feb I came out pretty hard stating that:

"There is no way SGH is going to have a crack at NXS in the short (or even medium term) - too much risk in view of both "conflict of interest" and "confidential information" issues. No way DV would risk his reputation on that. NOT GOING TO HAPPEN.

Little up tick in sp for short time I suspect and then back to ground zero again is my suspicion.

Losing a heavy weight "door opener" like DV (no matter anyone's personal opinion of him) is not a good thing for this already seriously struggling company."

Well, as it turns out SGH did not make a play (nor will it in my view), and the sp did in fact hit ground zero again within 2 days.

So, perhaps having established some credibility here are my thoughts (and it pains me to say this given I hold the stock and have copped a considerable capital loss on paper):

1) LDM is not the man for the job for a number of reasons - the market is slowly getting to recognize that. Keep in mind, LDM was in charge of WPL's Pluto project which had massive cost (billions) cost overruns (nothing he inherrited either - he was there since inception; his plans, his failure to execute).

2) DV's departure is a big blow for the company - he will not be replaced by anyone with a similar status/connections in the industry. Nobody of any standing will take on this company.

3) No matter how good the assets, if your company is debt laden this is a serious problem which will not go away by itself (that's financial reality for you!).

4) Shell may be interested in Crux but won't make a bid - would you if there was a 95% certainty that you could pick up the asset for next to nix once NXS goes into default?

5) Flagging a capital raising as a way to fix the capital problems is plain silly and shows a lack of corporate experience. Nobody (even though the market will know it is coming) will put in black and white that they will do a capital raising before they actually do it. Nobody! If you need to do a raising you go out and secure the funding at a certain discount and then announce. That's when you get a sp adjustment. These guys have made the incredibly silly, rookie, mistake of announcing first. Now they have copped a further 25% reduction in sp and when they eventually do end up raising capital from the market they will probably have to do so at a further 50% discount from the current market figure as we are now officially a penny dreadful. NO COMMERCIAL UNDERSTANDING OF THE MARKET! It beggars belief.

5) As has been flagged by many on this forum before, senior staff are grossly overpaid (particularly given their lack of performance). In the scheme of things these large salaries do not affect the P&L too much but it means managements' interests are not alligned with shareholder interests (that is to say, no matter what their performance, they will get their large salaries).

6) Unless major shareholders can be motivated and replace management (which is unlikely) nothing is going to change, the assets will not be sold off (not even for "below market value" prices), we will all get horrendously diluted with the next capital raising and this company will go into the history books as a company with huge potential that was squandered away by incompetent management and insufficient oversight by the board.

For me, it means I will most likely end up taking a very substantial financial hit over the next few months and sell out and move on (should have done so months ago). As much as it pains me, we all know that doing the same thing over and over again expecting a different outcome simply won't work. I for one may have to take my medicine given I can see no light at the end of the tunnel. A valuable, albeit very painful, lesson learned.

Here's hoping for a miracle - a miracle is the only thing that will ever get the sp to 10c again.

Well, that's just my view.