The Secret Broker: Tarting up the figure by a factor of four, can only end in trouble
The Secret Broker
The Secret Broker
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After 35 years of stockbroking for some of the biggest houses and investors in Australia and the UK, the Secret Broker is regaling Stockhead readers with his colourful war stories — from the trading floor to the dealer’s desk.
Every morning at around 8.30am, come rain, hail or shine, me and Mrs Broker grab a take away cappuccino in our ‘his n hers’ matching ecofriendly reusable coffee cups and go and sit by the sea.
Mrs Broker checks her phone to see what family dramas unfolded overnight, while I do a routine of 100 sit-ups, 100 push-ups and a couple of laps of the beach, in my mind.
Last week, I got a call from a broking mate who lives over ‘the ditch’, telling me about a listed New Zealand company that had managed to create a little earthquake, all by itself.
As he was telling me the story, I was loudly peppering the air with expletives ahead of terms like “someone’s wearing something they shouldn’t” and “that is something that needs covering” and Mrs Broker’s face was going brighter and brighter red.
I thought I was embarrassing her with my language, but as it turns out I hadn’t noticed a bunch of women walking past in their nothing-left-to-the-imagination Lululemon tight sweat pants and they thought I was rudely talking about them.
You know the type.
Weekend city blow-ins who are too important to return a ‘good morning’ to a lowly passing local resident.
Anyway, it’s a cracker of a story as it has created a unique set of problems for the listed company, the NZ exchange and thousands of trainee Warren Buffett’s.
The story actually starts on the 27th of November 2019, when the company released its half yearly results.
An error was made in an announcement and no one had picked it up and it only got corrected after a trading halt was put on the stock on the 23rd of July 2020 at 11.49am.
Considering that the company only made nine announcements in 2019, it’s not a bad effort to only get one out of nine wrong, and then in 2020, so far they have managed to ink out 15 announcements of which two were official speeding tickets and two contained errors that had to later be corrected.
The company has five directors and produces a gross income of $NZ436,000 ($405,030) that then turns into a $NZ693,000 loss for the year.
They pull out a total $NZ286,000 between them and their last payment to PWC for auditing them in 2019 was $NZ109,250.
Seems too much to me.
However, the valuation of the company between their two speeding tickets rose from $NZ3m to $NZ45m. Both times the company replied that it knew of no reason for the share price going from a close of 0.007c on the 9th of June 2020 to a close of 0.093c on the 22nd of July 2020.
That’s a total rise of 1,300 per cent on no known reason.
It turns out, and the reason behind my expletive responses when told about this, is that the company had stated that its Net Tangible Assets (NTA) sat at 15c a share, down from 22c per share the previous year.
Its correct NTA was 0.0015c per share, down from 0.0022c the year before.
Even though the company last raised money at 0.008c per share, it must have been partying too hard and on the Marlborough sauce when not noticing that twice it had incorrectly stated its NTA at 15c per share.
But it gets better!
Even though the wrong NTA announcement came out in 2019, the stock only started its run on the 9th of June. The reason appears to be that someone had picked this up and started to spruik the large gap in its share price and its NTA on Sharesies, which is NZ’s equivalent to the USA’s share trading platform, Robinhood.
Sharesies is a recent arrival, created to help the under 25s part with their cash, and I presume named after a play on the word ‘Shares’ and the all-in-one ‘Onesies’, as this platform encourages you to stay in your onesie and punt the market from as little as $NZ30 an investment.
They have created a loyal following and now have funds under management of over $NZ500m, and as with all these small traders clustering together, they started to push up the share price of our star company, Blackwell Global, 1,300 per cent before a trading halt was called for.
As the company had twice stated it did not know why its shares were going on a run, a couple of the directors saw this as a green light opportunity to feed some 5 million shares into the market, as thousands and thousands of PJ wearing punters lined up to buy shares.
After the company was finally forced to amend its last incorrect NTA announcement, the shares closed the next day at 0.041c, and as I type they are back down to 0.015c.
As the price started to rise so did the volume, where it peaked at 21 million on the day after they got halted.
Amazing stuff, and it just goes to show the power of the people, when they all get together and throw small sums at something, other than crypto.
I don’t know what is going to happen, now that the directors were selling into thousands of small investors, who may have put in as little as $NZ50, which is a bit like betting on the gee gee’s and not really a big enough loss worth bothering to complain about.
Never happened in my day, honest Guv!
The Secret Broker can be found on Twitter here @SecretBrokerAU or on email at firstname.lastname@example.org.
Feel free to contact him with your best stock tips and ideas.