We covered Ceres Power in the last edition of our magazine as part of the “5 potential 10 baggers” feature (click here, page 16 – http://issuu.com/spreadbetmagazine/docs/spreadbet-magazine-v6_generic) which included a short interview with David Pumell.
The company, although sat with around £14m cash at present, does require funding by around £40m through to 2016 – the point at which the Company expects to commence market penetration of their market leading fuel cell boilers. The deal with Itho-Daalderop Group B.V to sell a minimum 78,000 units into the Benelux countries over 4 years commencing 2016, and the continued support of British Gas, underscores the industry’s belief in the Ceres’ technology. Recent board appointments and the “Significant Technology Progress” announcement of 23 May 2012 are also very positive signs.
“Mr Market” however has taken a different view and questioned the degree of dilution that current shareholders are likely to face with a halving of the share price during the last 3 months. See chart below: –
There has been a persistent seller of the stock for the thick end of 2 months but interestingly, no RNS holding announcements, implying that none of the major shareholders have sold down their holding. If there is a fund raising I expect it be by way of an open offer as to “throw current shareholders under a bus” so to speak, through not allowing them to participate, would be career suicide by David Pummell.
What has caught my eye however is the recent firming of bid interest in the stock on Level 2 in the last 2 weeks and the rising volume as the chart below shows – my guess is that the replacement of brokers with Investec is a precursor to the capital raising the company is looking to carry out and news on this front is imminent. If it is underwritten and the stock goes largely to existing shareholders I can see a 2 fold rising on alleviation of the funding woes. I also think the fund raising is likely to be around 5p per share implying around 800m shares to be issued and so a 10 for 1 offer.
Watch this space as as soon as the fund raising is complete, SBM will be making Ceres a speculative Buy.