Ceres Power – what do management have up their sleeve?

The acid test for Ceres shares following the substantial rise seen in recent weeks following the recapitalisation will be what the stock price does once ORA hit the 29.9% – I think they are pretty much there now. Will IP2PO then step up to the plate or fresh buyers?

I don’t want to pat myself on the back too much given the concept of “sod” and “law” and the sheer ridiculousness of the situation under Pummell’s stewardship that resulted in the company effectively being given away and blindsided us (although the original thesis for the company being a potential 10 bagger always and still does remain intact), but we have read the situation perfectly in recent weeks (unlike our friend the ghoul that is “Sueyou” on the bulletin boards) – see posts below – 

http://www.spreadbetmagazine.com/blog/ceres-power-has-somebody-been-shorting-the-open-offer-stock.html

http://www.spreadbetmagazine.com/blog/ceres-power-lives-on-but-david-pumell-does-not.html

In particular here – “A value of around £15-20m seems more in line with the sector and arguably the company is at a similar stage to ITM Power which commands an enterprise value of around £22m at the moment. If we applied a similar EV to Ceres then we would be looking at a share price of around 7p.

In the chart above we can see the “gap down” from 8p and bearing in mind the points detailed below with regards to the share register dynamics (basically a very restricted new free float with very few people willing to sell south of 8p otherwise they would have sold recently) then I personally fail to see how the stock falls from here. A break of 3.5/4p to the upside would be a clear flag break that would pressage towards 7-8p too.”

http://www.spreadbetmagazine.com/blog/category/ceres-power?currentPage=2

SBM’s current take – The fact that ORA have continued buying, albeit with a 105m share cushion at a penny, implies to us that they and their partner IP2PO certainly believe the £100m plus sunk into the technology is worth considerably more than the current market cap. The story of the guy who needs to sell his Ferrari here and now to the only bidder in town for £20k even though it was really worth £100k springs to mind. ORA & IP2PO got probably the bargain of the year and there still seems a dearth of long term sellers. Now the market cap has been raised to a realistic level then any licensing news hereon out gives a more palatable equity value to raise capital from in around 9-12 months time. 

If you participated in the placing and got your average down to around here then its a difficult choice as to whether you roll with the new crew or reduce your exposure.