Zak Mir on Gulf Keystone (GKP): Code well & Truly cracked!

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Well what a day it was for GKP holders! A seemingly innocuous RNS announcing its forthcoming prospectus and move to the main market from AIM set of a crescendo of selling in late afternoon trade. Most likely the dreaded margin calls were triggered…

What with our old “friend” Mr Winnifrith round at Prophets of Perpetual Doom slapping another sell on the stock, after our Gulfsands Pet (easy to get confused I know) bet offer to him (still untaken by the way!) we wonder whether it is indeed time to go long again…

The essence of the sell-off seems to be based on the disclosure that GKP may, if their forthcoming bond sale does not proceed, wind up in an insolvent situation by, amazingly, May of this year. Additionally, if the bond issue is not a flyer then equity financing is the obvious next step. Read – DILUTION.

It seems a coin toss at this point as to whether the bond issue will get away but we suspect, in looking at the volume today, and also the prevailing sentiment amongst the bulletin board acolytes that is almost universally negative, that there is more selling to come from both institutional and retail fund managers in the days and weeks ahead.

What with the now vilified Mr Kozel’s last April’s multi million pound share sale (that sure looks prescient at this point!), the blow off rally after the Excalibur victory and the working capital deficit in the wake of the Competent Person’s Report it sure has been a roller coaster ride in recent months that’s for sure.

I touched upon the breakdown and how I would trade the shares in my Gulf Keystone – Cracking the Code Guide (click the image below for your free copy) but now, in looking at the chart below, what is apparent to me is that the Head & Shoulders break is well underway and the measured target is in the late 60p’s (being the height of the head), or lower. This would, in all probability, imply an equity raising to supplement the bond issue.

So, shock, horror! It would seem that Mr W and SBM are actually aligned in our short term view at this juncture – a worrisome picture indeed!

If you would like to receive my 3 most recent guides in which I cover my Top 5 AIM Oil plays and a macro outlook for 2014 and my favoured 2014 Top 5 shorts, click the image below for you free copies AND A COPY OF THE GKP – CRACKING THE CODE GUIDE! 


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