Monday, 4 November 2013

A #TERN for the worst

A Tern for the worst...or every cloud computing idea does not have a Silver(mere) lining. Clever eh?

Just a quick note about forgetfulness tonight. Some of you will have been in Silvermere (SLME). A microcap aiming to recover oil and gas from abandoned leases in Mustang Island, Texas. Last August 2012 they reported their well valves as ready to open for flow, and that “oil and gas should reach shore facilities within a week”. Suffice to say this didn’t happen and there followed various operational issues, the picture generally being very unclear. By the new year they needed a modest fund raise (£371,000) to see them through but in February we heard that the well was finally in production and that “we are pleased to note that initial flow rates are in line with expectations. Following the clean up phase we expect to establish continuous commercial production and to optimise flow rates”

But 3 months later (maybe they forgot to tell us?) Silvermere let the market know that one of the subscribers for shares in the January fundraising hadn’t paid for their £80k worth of shares (maybe they forgot to pay - easily done of course). And of course Silvermere then “forgot” not to issue them the 1.2m shares so they were sold without having been paid for. Nice work if you can get it.

And so it continued, until finally Silvermere was wound down – although it stayed on life support - just. In August this year, out of the ashes of Silvermere, Tern (TERN), an IT focussed shell was formed, looking for the next big thing in technology - cloud computing, mobile comms, big data etc. Each ordinary Silvermere share was subdivided to become one new Tern share worth around about 5 peanuts each and a deferred share worth nothing.

In October the board decided that because our shares were only worth around 5 peanuts each, it wasn’t really worth most private investors selling them, so for every 1000 shares we owned they would consolidate them into 50 new shares each. But for anyone with less than 1000 shares that meant it wasn’t worth us having them at all, so the board decided they would sell them on our behalf and keep the proceeds “for the benefit of the business”. Presumably they “forgot" that it was because of them that they were only worth 5 peanuts each in the first place?

Finally, today, November 4th, we hear that the new Chairman, Angus Forrest, accidently “forgot” to disclose some pretty important news in a circular to investors in July 2013. Here’s today’s RNS. He “omitted the following directorships of businesses which became insolvent whilst he was, or within 12 months of ceasing to be, a director” :

  • 1990 - Logistix Recruitment Ltd
  • 1993 - Challenger Communications
  • 1993 - Kelways Nurseries Ltd
  • 1995 - CafĂ© Poppy plc
  • 1999 - BMI Electronics Ltd
  • 2000 - Waterstone Glassware Ltd
  • 2003 - Medinfonet Ltd
  • 2012 - Digital Learning Marketplace Plc
My God?!? Has he ever been involved in anything that has not been wound up, down, or had a CVA applied? And he “forgot” to include this relevant information in a circular nearly 4 months ago which was primarily a sales pitch for the new company Tern? I fear that with such a forgetful board and chairman we may as well immediately add Tern to the list above. What do you reckon? 2014? Maybe give it until 2015 after all we don’t actually have any business at the moment so surely we have to endure a full 12 months of deal making before going bust?

Lest anyone forget, I suggest we use the above story as a lesson on when to cut and run. I’m currently reading The Naked Trader by Robbie Burns. A decent reminder of how not to invest. In it he describes how many investors find it impossible to sell bad stocks, holding onto them forever in the forlorn hope that they will recover. When directors “forget” fundamental issues, it should ring alarm bells load and clear. I know it’s easy to be wise after the event, but I am going to do my best to forget all about the sorry experience of Silvermere and Tern, the current forgetfulness of the chairman, and his grand ideas for cloud computing. Cloud cuckoo land more like. But I won’t forget the lessons learnt the hard way.

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