This is a special situation investment where the Kubera Cross Border Fund is in the process of selling their latest assets and returning proceeds to shareholders. I estimate the net proceeds per share, if all goes well, at 39ct USD per share of which I expect ~20ct USD to be returned before year-end. The shares currently trade with a bid/ask of 25ct/31ct. The company trades on the AIM market of the London Stock Exchange. The shares are extremely illiquid.
I submitted a full write-up on http://www.microcapclub.com to apply for membership, hence I am not sharing further details here.
When I invest in a company I want to make sure that I understand the company’s filings properly and that I have a good view on the sources I can use to obtain company information.
My mother tongue is Dutch, however the number of (interesting) companies trading on the Dutch stock exchanges is very limited. As a result I mostly invest in US securities. Which also have the advantage of clear reports which are easily accessible.
The disadvantage here is that my fellow investors, #competitor’s, also know their ways to find all relevant data and are part of probably the largest investment group in the world (investors who understand English). My investing edge has to come from better interpretation of available information rather than investigative work to find more information than the competition.
For US illiquid nano/micro-cap securities the disadvantages are limited from my experience. Hence, this is where I invest a large part my portfolio.
From time to time, when I can’t find anything interesting in the US, I start looking at securities on other exchanges. About two years ago I stumbled upon a very interesting liquidation play where my estimate of proceedings to investors was ~200% higher than the stock price with limited risks. It took me about a month to buy some shares. I think that the shares only trade 1 or 2 days per month. Bid/Ask spreads are often ~100% (Ask two times the Bid).
During the last two years unexpected uncertainties arose. About 50% of the company’s value became at risk. At this point I even tried to sell some shares at 50% of net asset value (NAV). Luckily for me it was impossible to do so. The Bid/Ask spread was 200% and all my sell orders were cancelled because they deviated too much from the Bid price. My broker couldn’t help it. Once you get into this stock, it is impossible to get out.
Recently the story de-risked tremendously. About 50% of the company’s net assets consists of cash at this time, which will be distributed to shareholders. The current bid is approximately 30% of the company’s NAV per share and the current ask is approximately 75% of the company’s NAV per share.
At this time my buy orders are also being cancelled as they deviate too much from the current Ask. Hopefully I will be able to buy more shares soon and share the idea on this blog.