Previously writing about Flybe (FLYB) I suggested that, borrow permitting, it should be shorted as: Either way, the only possible outcome for shareholders other than receiving 1p per share in this deal, which requires ratification of 75% of votes, looks to be to receive nothing at all.
I have closed my short from higher up (c16p) at around 2p, as the recent change of tack by the bidding consortium - in which they have acquired the trading business from the holding company for £2.8 million (a cunning move I had not anticipated) - alters the goalposts in the short term. It effectively means that Flybe is now a shell company with approximately £2.2 million in net cash (I am assuming that the £0.6 million difference between the £2.8 million paid to the holding company and the £2.2 million bid for the group means that the former has liabilities of around that amount).
If this is the case, shareholders can either vote for receiving 1p per share (the £2.2 million) or, instead of the original alternative of receiving zero in an insolvency, hold on to a shell with 1p per share cash in it. While it is true that the real value of a listed shell is £0.5 million max, there is now no finite end game in Flybe and there is no saying where deluded retail punters, desperate to recoup losses, might take it, if, as I suspect will happen, the 1p bid is rejected (75% of votes cast are required for the acquisition to complete, an outcome which is now of no interest to the consortium who have what they want without recourse to shareholders).
Therefore, before reality sets in - which of course it eventually will - it would not surprise me to hear stories about how some hotshot entrepreneur is planning to use it as his or her vehicle. Former Stobart CEO, Andrew Tinkler, the scoundrel fired by Stobart last year, who acquired 12% of Flybe the very day the 1p bid was announced springs to mind, but it could be anyone. The current share price values the shell, ex-cash, far too highly it is true but I have seen much crazier prices paid for hope value and so it as well to be out of this one and look to reopen if things get really crazy.
This article first appeared on the N50 website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tip from Tom & Steve and a new shorting piece from Lucian this week click HERE
Filed under: Flybe, Bullcast, sells for 2019, Audioboom, GlaxoSmithKline, N50 website, Lucian Miers
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