Andalas Energy and Power: (LSE: ADL)
Are Andalas Energy and Power leading the way for long term investors?1
On the 23rd of October, Andalas Energy (ADL), formally CEB Resources, requested a temporary suspension of its shares. It followed a number of podcasts and interviews the CEO had given outlining the company strategy. Whilst most companies use suspension during times of crises or the prelude to share sensitive news, ADL, it would seem, have instead used it as a new tactic to protect their short term goals.
To some it may have come as a disappointment seeing their investment locked in suddenly and without a timescale of when the company will allow trading to take place again. Others may see it differently. The luxury of time is hard to come by for most AIM companies. With interest growing in a company it draws volume in its trade. Along with the volume, there is opportunity for manipulation in the share price, much to the dismay of those intent on holding for the duration.
Following the suspension, the company released an update RNS which outlined their plans of acquiring a number of assets. Even before the suspension and subsequent RNS, the objectives remained the same and were openly discussed by the CEO. Dave Whitby was aiming to build a company that would benefit those who chose to invest early. Leading up to the surprise suspension, there would have been enough time for their followers to have made an early entry point and wait for good fortune. A golden rule amongst investors is to do your own research, and those who have invested will know if they’ve made the right decision soon enough.
The accumulation of certain events – the 100 day plan completed, a clear strategy well publicised, increase in volume then suspension, may have created a new model for other AIM companies (New and old) to follow. Rather than allow the share price to spike or plummet, they’ve provided protection to the long term investors while they look to carry out their plan. In the oil and gas industry, one of the biggest external factors being the price of oil, will have had an effect on their share price. This effect has now been side-lined while the company puts in place its building blocks. It has also locked in its market capital should Dave Whitby need to raise more funding in purchasing the targeted assets. Had they not suspended themselves, the share price could have risked dropping with the delay in news and meant that any future placing might be done against a lower share price. Not good for those already on board.
Dave Whitby displays himself as a confident business man. Many of the investors in ADL decided to invest in the CEO, rather than their knowledge of the company’s intentions. They have a lot to prove to their own shareholders, but if they are successful in this approach, it can prove so much more to other AIM companies that there is a way to protect their long term investors.