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Serinus energy 170% dual listing arbitrage play ( #senx/ $SENX AIM LSE, $SEN WSE). Sounds interesting right? Serinus is a tiny upstream oil & gas exploration company with operations in Romania and Tunisia.
While LSE AIM listed #SENX trade for 3.8p, Warsaw listed $SEN trade for 0.53pln or 10p GBP at todays exchange rate.
Company IR and filings confirm that shares represent same economic value. In fact only 78 million of the total 1.1 billion shares are listed on the WSE, thus the more liquid AIM shares trade at a massive 170% discount. So why the discrepancy?
First some history: Serinus previously was dual listed on the Toronto and Warsaw exchange. In May 2018 they moved from the TSE to London AIM exchange. Since then all new shares have been issued on AIM with only 78 million on WSE.
Serinus until recently had £32 million outstanding debt owed to the EBRD (EU bank for reconstruction and development) which they couldn’t meet repayments for.
In Nov 2020 they converted this debt to equity with a $20million equity raise at a share price of 2p. The debt was retired for $16.5 million and 9.9% shares outstanding (112 million shares) valued at £2.2 million at 2p share raise price and £4.2 currently.
Side note, management also spring loaded their options grant at this placement price of 2p. And participants included Richard Sneller ex Ballie Gifford fund manager.
Updated Cap structure consists of 1.1billion shares outstanding (vs. 240million pre placement) with 78million WSE listed.
Since bankruptcy has been taken off the table shares have rocket upwards from 2p to 3.8p on AIM and even further to 0.53pln on WSE or 10p equivalent. So why does this opportunity exist?
Well, there is likely a significant seller of the LSE AIM shares. Those who bought at the bottom/took part in placing have already realised almost a 100% gain in approx 1 month. Not unreasonable to want to take money off the table.
And the real question will this discount close? Well historically LSE shares have often traded at par or even a premium to Wse shares. No reason to think this won't happen again.
Best way to play this would be a pair trade long SNEX AIM and short SEN WSE. If this is not an option (as in my case currently) it begs the question is there value going long SENX AIM on its own? This riskier option requires us to examine what the company does.
Serinus Energy is a tiny upstream oil & gas company (75% gas) with sites in Romania & Tunisia. Pic below gives the company explanation for needing the share placement and the following link is the CEO most recent investor presentation: https://www.sharesmagazine.co.uk/video/serinus-energy-senx-jeffrey-auld-president-and-ceo
Bull case would be: 1) Low cost producer $8.96/boe 2) Increased production (1247 boe/d q3 2019 to 2415 boe/d q3 2020 with management claiming they can increase this by a further massive 5,500boe/d in next 18m) 3) Free cash flow positive (£8.8m free cash flow 2019).
If production ramps up as claimed and oil prices recover this could rocket higher.
Bear case: 1) Long history of destroying shareholder value 2) Depressed oil/gas prices 3) Political risk 4) Management risk 5) Russia-Europe gas pipeline 6) Need to find new reserves. 6) Iliquid tiny microcap
PS. Usual caveats apply, I hold shares of #SENX, DYODD, this is high risk
PPS. I have considered that someone could be artificially inflating WSE SEN price in order to encourage retail traders like myself into SENX AIM driving the price higher so they can dump their AIM shares.
PPS. I have considered that someone could be artificially inflating WSE SEN price in order to encourage retail traders like myself into SENX AIM driving the price higher so they can dump their AIM shares.
As this is my first tweet sorry for the spam to try and get it out there, I know this wont interest 99% of you but if even 1 person finds it useful take it as my thanks for this awesome community: cc @AndrewRangeley @puppyeh1 @aceglobalvalue (after all your great work on Haier)
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