Is the China Gateway in trouble?
Have China Gateway International PLC been able to raise the £25,000 they needed?
Back in October 2010 China Gateway International PLC announced that it had issued 217,391 shares at eleven and a half pence per Share. That being what the shares go for these days (11p). The subscription was supposed to raise £25,000 in cash for "general working capital purposes" which sounds a bit like paying the bills to me.
Now I don't know everything there is to know about share dealing but I am pretty sure I picked up a thing or two working for a company that teaches (and uses) it. So I took a look at the CGA stock prices and noticed a few things.
One thing I noticed is that no one has shifted 200,000 shares. The biggest volume trade was at 10p each and moved £300 of shares. Now anyone will tell you that a share is only worth what people will pay you for it and it seems to me that no one will pay for these shares.
From trading at 360p each back in 2007 CGP shares are down to 10p each these days. So if you have a spare £200m you could buy every share going. Indeed for around £75m with a 7.5p a share offer one could easily own a controlling share. Even KCC could afford that.
However would you want to? This is not exactly Icelandic banks we are talking here but all of these land deals have been backed by Israel Discount Bank Ltd and one imagines that, sooner or later, they will want paying out.
Indeed to settle some of the debt there was a "disposal of properties" in Dover back in March 2010 to try and raise £5 million towards the debt. That "disposal of properties" and the announcement that just over a quarter of the stock was held by two companies there was a fairly significant loss of close to 50% of the stock value (from a huge 20p each down to 11p each).
So with CGA hard pressed to make £5m selling off assists and only seeming to manage £300 (thats three hundred quid) from a share issue one might expect some fairly drastic trying not to go under actions in the next six months to a year when the bills are due again.
In fact we could see panic should a significant investor try to liquidate his (or her) position and get out of the trade when no one is buying. A drop of 9p per share would place the entire company value at less than the value of the land which is, I should think, going to stop too much more slump. Even so £200m seems a fairly high estimate of the total company value to my mind but currently that is (with a very slight down trend) what the market is saying.
Meanwhile we have a vote coming up where any sensible voters might be thinking about asking the council why they voted through the China Gateway Planning Permission in the first place. Such questions could put whatever value the planning permission holds in jeopardy... maybe.
Please note I am not an expert in stock movements but I do pride myself on knowing how to read a chart properly. Financial data provided by reuters.com.