Escrow Watch: The wait for that Elixinol sell off begins
Escrow Watch
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Escrow Watch is Stockhead’s fortnightly recap of the small cap companies releasing shares that have been locked away in escrow.
Escrow refers to shares that are held by early investors or directors restrained from selling for a year or two.
The release of escrowed shares can have a big impact on a stock’s price. If the holders choose to take up their right to sell – the shares you own can fall.
Since Monday this week, 18 small caps have released, or are set to release, over 470 million shares between them.
| Code | Company | Date of Release | Shares | % of company |
|---|---|---|---|---|
| EXL | Elixinol Global | 8 January | 77,870,572 | 56.47% |
| CBY | Canterbury Resources | 9 January | 212,990 | 0.03% |
| TPS | Threat Protect | 15 January | 4,761,905 | 1.98% |
| CY5 | Cygnus Gold | 15 January | 15,577,088 | 22.82% |
| JRL | Jindalee Resources | 15 January | 100,000 | 0.26% |
| RCW | RightCrowd | 16 January | 5,953,883 | 2.99% |
| CPH | Creso Pharma | 16 January | 500,000 | 0.03% |
| TIE | Tietto Minerals | 18 January | 94,017,497 | 31.13% |
| UWL | Uniti Group | 18 January | 6,278,030 | 1.85% |
| BEM | BlackEarth Minerals | 19 January | 37,170,000 | 26.23% |
| MRQ | MRG Metals | 22 January | 90,000,000 | 11.22% |
| SPT | Splitit | 22 January | 5,368,699 | 1.72% |
| CG1 | Carbonxt | 23 January | 3,623,774 | 2.80% |
| GSM | Golden State Mining | 23 January | 1,700,000 | 4.64% |
| APV | AppsVillage | 28 January | 1,829,439 | 2.39% |
| BC8 | Black Cat Syndicate | 30 January | 24,788,267 | 29.44% |
| ATU | Atrum Coal | 1 February | 57,142,858 | 11.94% |
| RCL | Readcloud | 7 February | 43,574,909 | 44.50% |
Welcome back, this is Stockhead’s first Escrow Watch since December and we’re picking up where we left off: Elixinol Global (ASX:EXL).
In December, Paul Benhaim left the company he founded many years before, although remained on the board, as the new CEO swept through with some big changes.
The issue at hand was Benhaim’s 56 per cent shareholding in Elixinol. He promised not to sell more than 10 per cent of his holding in the six months after the shares came out of escrow on January 8, nor more than 10 per cent in the six months after that.
That shareholding is now free to be traded, outside blackout periods (Benhaim is still a director so subject to periods when he isn’t allowed to trade, such as just before financial results are released).
As per Benhaim’s promise, a total of 7.8m shares could be hitting the market in the months to about July 8.
ReadCloud (ASX:RCL) is another that listed two years ago and has a big chunk of the company coming out of escrow.
The educational software company had a stellar first five months on the market, before the bottom fell out of a run in August 2018.
ReadCloud still has the support of investors like Cyan Investment Management, but its shares have struggled for lift-off since 2018. In November the company said current users were double that of 12 months earlier, with the implication that revenue would follow.
One company that may be ripe for an escrow sale is gold explorer Tietto Minerals (ASX:TIE).
A year ago Tietto non-exec director Mark Strizek told Stockhead it was aiming to double the 700,000oz Abujar project resource in Cote D’Ivoire, West Africa, in an April resource update.
It exceeded that goal, significantly, as Abujar soon hit 1.7 million ounces and was growing fast.
Since then, an extra 20,000m of drilling has been completed using the company’s four wholly owned rigs, which updated the resource estimate to 2.2 million ounces in November, and a $17m cap raise will fund a 50km drilling campaign this year.
As such, the explorer’s stock is up — not as high as it was in November, but still up, potentially making it attractive to sell for the owners of the 31 per cent of the company coming out of escrow this month.
The same cannot be said for BlackEarth Minerals (ASX:BEM) and Cygnus Gold (ASX:CY5), whose stock is decidedly low just as large chunks of the companies are being released for trading.
