SP New Energy [SPNEC suspended] [link] confirmed reporting that it is “in talks” with “various stakeholders, advisers, and potential investors” in response to an article that said SPNEC’s owner and CEO, Leandro Leviste, was working with fund managers on a potential private placement share sale. SPNEC needs to sell at least 2.12 billion common shares to a third-party buyer to comply with the PSE’s 20% minimum public ownership rule and have its trading suspension lifted that has been in place for the last 80 days. SPNEC said that is is “preparing to submit” a “Plan of Action” for the stock to resume trading, which SPNEC said will include a request for a “temporary minimum public ownership exemption”.
MB BOTTOM-LINE: What was originally spun as a mild inconvenience for SPNEC bagholders has ballooned into a suspension that has lasted for over 11 weeks (over 20% of the trading year). Discontent with the situation is growing, and I’ve seen an uptick in messages from concerned shareholders since the start of August. Deals take time – even under perfect circumstances – and especially when the circumstances are (as they are here) far from perfect. If one wanted to try to read between the lines, SPNEC’s avoidance of talking directly about the main point of the article, that SPNEC was in talks with fund managers for the private placement, could say that SPNEC knows its inability to acquire an investment from another strategic investor is a negative sign. Financial investors (like funds) tend to be return-oriented with a defined time horizon for that return, meaning that SPNEC might need to give a fund better terms to sweeten the pot. They’re less “sticky” than a strategic like Metro Pacific [MPI 5.05, up 0.2%; 81% avgVol] might be, meaning that a fund isn’t likely to be a “ride or die” partner, increasing the risk of some mass selling event like what Converge [CNVRG 8.94, down 3.9%; 109% avgVol] experienced when its fund, Warburg Pincus, unceremoniously exited its CNVRG position suddenly and without notice. It’s not automatic that a deal with a fund is bound to be worse for SPNEC and for its shareholders. Still, to me, it’s not a great sign considering how SPNEC soured its relationship with Ricky Razon’s Prime Infra, has already seemingly maxed out its relationship with MPI, and is appealing for exemption from the minimum float rules to lift the suspension. All that tells me is that SPNEC does not have the high ground in this fight, and will likely need to “give” more to the eventual buyer to get out of this mess of its own doing. I could be wrong, though. Maybe SPNEC is just working on a master stroke of a deal that will build a foundation for growth that will support the company for decades to come. Like always with this stock, we just don’t know, because the plan isn’t public and whatever strategy we know is subject to substantial change.
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