... or The Week the Music Died for Paperlinx and Toby Marchant
An ASX Release on Black Friday, May 13, 2011 was just another cockroach.
What it contained really doesn't matter now. It was more bad news for PPX and finally shook PXUPA from its perch.
Consider The Week the Music Died Chart to appreciate what was happening to PaperlinX, from the perspective of a cockroach watcher. It's an old exhibit, 2007- Jan 2012, upgraded for this posting. You'll note PXUPA was then a lofty $16.75.
suX wouldn't be surprised if Toby Marchant now suffers from Gelotophobia.
He was appointed CEO on November 1, 2010. Milton Keynes opened in April 2011 and his six month honeymoon was over by May 1, 2011.
The ASX release was Friday May 13th. His party was over before it started.
In the week to May 13th, PPX dropped 26.8% and PXUPA 31.5%.
In absolute terms, that was a shocker which prompted Toby's market briefing on Wednesday May 18. There he was flanked by CFO Tony Kennedy (now resigned and departed June 30, 2012) and Company Secretary James Orr (retrenched and departed June 30).
The news services reported
"PaperlinX says it is solvent".
suX has reviewed the briefing, aptly titled at the time End of Another Beginning or Beginning of THE END. It includes the audio with Q&A.
Just a few morsels:
"Solvency is not an issue," Mr Marchant said on Wednesday.
"Operating cash flow continues to be positive and we have no concerns with liquidity."
"We anticipate that all bank covenants will be met."
With the benefit of hindsight, it's easy to appreciate the Cockroach Theory.
Toby gave it his best but Mr Market ignored him. Perhaps those uncouth Australian financial analysts weren't paying attention. The "smarties" obviously saw the TRUTH WRIT LARGE.
It gets worse. You'll see on The Week the Music Died Chart, and Table below, that when the general market enjoyed its post GFC peak on April 16, 2010, PXUPA was $66 and PPX was 82 cents, well above its NTA of 60 cents.
Note that PPX traded above its NTA in the cells shaded green, before Black Friday, and below its NTA since Black Friday.
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| Friday 13 May, 2011 The Week the Music Died for Toby Marchant |
While PPX had been falling in a straight line, refer Chart, PXUPA had been range bound.
All changed on Black Friday. PXUPA dropped 27% in one day and was down 31.5% for the week, and has fallen steadily to $9 ever since. In the same week, PPX fell another 27% following its previous 66% fall and is now sub 6 cents.
Why is PXUPA's fall so serious? Not because suX owns a stack of them, suX bought after the big drop, but because when hybrids act like equity then the party is generally over for the ordinary shareholders (PPX). Hybrid securities acting like junk isn't good.
Bear in mind this was all happening when the reported Net Tangible Asset (NTA) of each PPX was 34 cents, and that's after paying out $100 for each hybrid PXUPA.
On Black Friday, Mr Market believed there were more cockroaches around and he was correct again. In May 20011 there was no suggestion of selling the Italian and US operations, and abandoning Milton mausoleum.
The highly qualified ‘proposal’ of $0.09/$21.85 by 'opportunistic' private equity of on Dec 23, 2011 now looks generous.
Is there a solution. Yes, but everyone already knows it except Harry and Toby.
No one is listening to anything they say, even if it may be right next time.
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