Whats next forTungsten(LSE: TUNG)?
According to somerumours, the companys management is now gearing up to take the company private.
Indeed, trades in the City have begun to speculate that Tungstens CEO and founder,Edi Truell, is planningto withdraw Tungsten from the public markets following a year of turbulence.
During the past 12 months, Tungsten has fallen spectacularly from grace. Since the end of June, the companys shares have declined by a staggering78%, leaving many investors sitting on large losses.
But its not the monetary losses that are the most concerning. Since becoming a public company, Tungsten has consistently missed targets set out by management.
As a result, managements reputation lies in tatters and shareholders have turned their back on the company.
It would be unfair to say that Tungsten hasmisledinvestors on purpose. Like all early-stage growth companies, Tungsten has been forced to deal with its fair share of problems.
Although, in many respects, the company should have ironed out these problems before it became a public company.
For example, Tungstens invoice-financing arm had been aiming to lend out 58m to customers by the beginning of this year. However, by May, due to lengthy background checks only 20% ofthe customers Tungsten had signed up to use itsinvoice-financingfacility had been able to borrow money.
Still, Tungstens management remains upbeat about the companys prospects. Earlier this week the company raised 17.5m through a share placing to improve its cash position.
Tungsten might have some mistakes but Crispin Odey, the hedge fund manager and one of Tungstens largest shareholders, believes that as the company gets its house in order, Tungsten can generate 8m of profit in two years on a loan book of260m to 300m.
City analysts arentso optimistic and are forecasting that Tungsten will still be loss making by 2017. A pre-tax loss of 5.4m is projected.Last time I wrote aboutTungsten, analysts were expecting Tungsten to report earnings per share of 14.3p for fiscal 2017.
Apparently, analysts are only becoming more sceptical about Tungstens outlook.
Its the City scepticismthat is apparently the reason behindEdi Truells drive to take Tungsten private.
The markets attitude towards Tungsten has changed, and it seems as if many traders and analysts are out to get the company. As a result, Tungstens reputation has been shot to shreds.
Going private wouldnt solve this problem entirely, but it would certainly allow the companys management to sort out Tungstens troubles in peace.
Nevertheless, if Tungsten were to go private, it would leave initial investors as well as those that brought at any point during the past 12 months sitting on significant losses.
Unless management brought out existing shareholders at a large premium to the current price, none of Tungstens existing shareholdersarelikely to be overjoyed at the prospect of the company going private any time soon.
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