The Speculator

Our holding in GoConnect shares means we should be entitled to 30,000 shares in a distribution in the new year.

PORTFOLIO POINT: GoConnect shareholders to collect free handout in associate valued at $0.3035 a share as frenzied trade continues.

The emerging internet content provider GoConnect (GCN) saw its shares almost double last week, from a low of 3.6¢ to a year’s high of 7.1¢ on a turnover of 526.17 million. Then the price slipped back to close the week at 4.7¢ after the Speculator took a profit on the sale of 80,000 shares at 7¢.

Nevertheless, the shares surged back this week, with 102.5 million traded on Monday to 5.6¢, 40.62 million on Tuesday closing at 5.2¢ and to lunchtime today, another 17.66 shares traded to 5.2¢.

The company has been awaiting an independent valuation on a free distribution of 135 million shares in its partner company, Priority One Network Group Ltd, to give that company sufficient spread to list on the ASX. GoConnect shareholders with a minimum holding of 55,000 shares at October 21 ranked for the issue.

On December 8, last week, GoConnect announced the independently assessed enterprise value of Priority One had come in at $273,163,550 with a share value of $0.3035. For every 100,000 GoConnect shares held on the ex-date of October 21, 15,130 Priority One shares should be awarded.

If they trade at anything like the valuation, followers of the Speculator should be well-pleased. For we held 200,000 GoConnect on the “ex” date, meaning we should collect more than 30,000 Priority One shares in the new year.

The announcement did not identify the independent valuer, but promised a copy of the independent valuation would be included in an information memorandum to be dispatched to qualifying GoConnect shareholders.

Viralytics punters lock-in a steep discount

Shrewd shareholders in cancer-cure hopeful Viralytics (VLA) have ensured for themselves a steep discount for their entitlements in a capital raising that closed today.

As reported in this column on November 30, Viralytics announced on the same day a generous share purchase plan at a 15% discount to market to support the accelerating clinical development of the company’s promising lead oncolytic drug Cavatak.

Eligible Australian and New Zealand shareholders (registered at November 29) were invited to subscribe for up to $15,000 worth of Viralytics shares at a 15% discount to market, with no brokerage or transactions costs. Minimum subscriptions would be accepted from as little as $500 up to the maximum of $15,000.

Stockbroker Patersons Securities is acting as lead manager and underwriter for the share purchase plan up to $1 million. The issue price will be based on a 15% discount to the weighted average share price for the five trading days before and including today, the closing date of the offer (December 14).

Readers might recall that Viralytics shareholders voted on August 3 in favour of a 10-to-one share consolidation to eliminate the company’s “penny stock” image and improve its appeal on the US over-the-counter market .

Ahead of that, the Speculator held two parcels of VLA shares:

  • 75,000 carried over from the end of 2010 at a closing price of 4.5¢.
  • Another 50,000 purchased in mid-June at 6.9¢.

After the shareholders approved the 10-to-one consolidation, the new shares were quoted on a “deferred settlement” basis for several weeks while the consolidation was completed, resulting in one parcel of 7500 shares at an historic cost of 45¢ and 5000 shares at a cost of 69¢.

Due to a clerical error, when the shares were requoted post-consolidation, the second parcel was omitted from the portfolio in late October. I confess I discovered this anomaly only after writing last week’s column.

Since the announcement of the share purchase plan on November 30, Viralytics shares have steadily fallen from a week’s high price of 48¢ ahead of the announcement two weeks ago, to a low of 30¢ yesterday, matching an earlier year’s low.

Although turnover of Viralytics’ 59,858,379 issued shares has been relatively modest, they’ve certainly turned up on falling prices in the past five days, in which the average weighted price will determine the issue price of the entitlements offer.

Quite obviously, shrewd shareholders have willingly sold their stock down knowing they may replace it at a discounted price while at the same time, in many cases, locking in a tax loss.

This determined me to sell 12,000 near the end of last week at 40¢, retaining 500 and lodging an application under the entitlement for $6000 worth of new shares at a price to be determined. We’ll know how much the discount is next week.

-The Speculator portfolio, as at December 14, 2011
Company
ASX
No of shares
Bought
Purchase price
Current price
Current value
Image Resources
IMA*
15,000
31/12/2010* *
0.362 av
$0.290
$4,350
Viralytics
VLA
500
11/06/2010*
$0.690
$0.340
$170
Robust Resources
ROL
6,000
31/12/2010*
$1.49 av
$1.380
$8,280
Scotgold Resources
SGZ
25,000
31/12/2010*
$0.053
$0.067
$1,675
Scotgold Resources Options ex30/4/12 @ 8c
SGZO
2,500
$0.000
$0.015
$38
Coalworks
CWK
10,000
31/12/2010*
$0.830
$0.605
$6,050
GoConnect Ltd
GCN
120,000
31/12/2010*
$0.038
$0.052
$6,240
Minemakers
MAK
20,000
25/01/2011*
0.425 av
$0.285
$5,700
Platsearch
PTS
20,000
8/02/2011
$0.130
$0.115
$2,300
Broken Hill Prospecting
BPL
20,000
22/02/2011
$0.160
$0.085
$1,700
Austpac Resources
APG
40,000
2/03/2011
$0.060
$0.043
$1,720
Potash West
PWN
11,050
30/03/2011***
$0.200
$0.205
$2,265
Cortona Resources
CRC
20,000
13/04/2011
0.146 av
$0.130
$2,600
Golden Gate Petroleum
GGP
270,000
20/04/2011
0.013 av
$0.020
$5,400
TNT Mines
TNT
4,440
22/07/2011
$0.000
$0.250
$1,110
Quickstep Holdings
QHL
20,000
23/11/2011
$0.185
$0.150
$3,000
Orpheus Energy
OEG
19,250
17/08/2011
0.164 av
$0.160
$3,080
x
Total value of portfolio
$55,678
Cash at bank
-$8,777
Total
$46,901
x
Portfolio change since January 5, 2011 (started with $50,000)
-6.20%
All Ordinaries change since January 5 2011 (then 4846.9)
-12.28%
x
* Shares held from previous year, carried at their December 31, 2010 closing price. * * Bought extra 4000 Image March 15, 2011, at 42.5¢. Bought extra 5000 Minemaker, March 16 at 36.5¢. *** subscribed for 10,000 shares at 20¢ each - plus free 1050 entitilement from Image Resources. April 13: Bought 5000 CRC @ $0.165; sold 25,000 CRC options @ $0.05. April 20: Bought 60,000 Golden Gate Perro GGP @0.017 $20 brokerage = $3,120. May 11: Bought extra 50,000 Viralytics @ 6.2¢ = 0.046 av price. May 18: Sold 25,000 at $0.10; $2500 (less brokerage) = $2480. May 25: Bought 20,000 MAU @ $0.15 $20 brokerage = $3020. June 1: Sold 8,000 MAU at $0.25.5; $2020 (less brokerage). Will buy 50,000 VLA @ .069 plus brokerage ($20) = $3,470. July 13: Bought 100,000 GCN @ 0.08 plus brokerage ($20) = $820. July 20: Bought 15,000 CRC @ 0.14 plus brokerage ($20) = $2,120. July 22: Free TNT Mines allotted = $1,100. August 10: Bought 3,000 Robust Resources @ $1.25 plus brokerage = $3,770. August 17: Subscribed for 8,000 Orpheus Energy @ .25 (no brokerage) = $2,000. August 31: Bought 7000 IMA @ 0.31 $20 brokerage = $2,190. September 21: Bought 120,000 GGP @ 0.009 $1080 brokerage = $1,100. September 28: OEG 1250 from free 1 for 8 distribution from parent Coalworks (Sep 23) plus on-market purchase Sep 25 10,000 at 11.5 ($1150 brokerage) = $1,170. October 26: Consolidated VLA holding, 12,500 shares @ average 55.2c. NOTE: TNT not listed yet (deferred); but issue was "shares worth 25c). November 23: Sold TRF (net $2580) and MAU (net $1660). Bought 20,000 QHL @ .185 $20 brokerage = $3720. November 30: Sold 80,000 GoConnect @ 7¢ = $5580 after brokerage. December 6: Bought 90,000 GGP at 1.8¢ =$1640 (inc brokerage). Sold 12,000 Viralytics (VLA) @ 40¢ = $4780.

Noteholder converts ahead of the sell-down

On December 7, La Jolla Cove Investors Inc – an American company that specialises in taking short-term positions in companies – converted $US25,535 of funds advanced to Viralytics under a convertible note into 69,950 shares at $0.3574. The next day was the last day the shares sold at 40¢ before the slide began to determine the share purchase plan issue price.

The good news is that La Jolla’s convertible note balance has now been reduced to $US123,842 and is less likely to weigh upon Viralytics’ future share price.

I believe the present share price slide will be short-lived and almost entirely due to the above-mentioned trading opportunity in switching stock, which ends today. La Jolla may also have played a role.

As reported in this column on October 26, Viralytics Phase 2 trial comprised recruiting up to 63 advanced melanoma patients to be injected with Cavatak into multiple tumours on up to 10 separate occasions over an 18-week period. The primary end point of the trial will measure immune-related, progression-free survival at six months.

While Viralytics was then perceived to have sufficient funds to carry its operations through to mid-2012, we tipped that existing shareholders might enjoy a favourable opportunity to add to their holdings in any forthcoming capital raising.

The November 30 announcement of the share purchase plan will assist Viralytics to expand its clinical program into a second Phase 2 trial in another indication, such as lung cancer and pancreatic cancer.

In another announcement last week, Viralytics confirmed a further institutional review board approval (IRB) for its USA Phase 2 Cavatak melanoma trial. It is now recruiting patients at Utah’s Huntsman Cancer Institute.

David Haselhurst writes a monthly column for Money magazine. Please note that he is not able to provide personal replies to emails.