Frustrating, page-3

For those who may be new to this thread and wonder why SBG and others are getting increasing frustrated, here is a summarised breakdown of what's in play:

1. Persistent selling in past 12 months - Those of us who's been following this stock would have seen heavy sell-down each and everytime positive momentum comes along, with a stack of around 10m shares spread across 1.5 - 2c. Patos got issued hundreds of millions of shares back in 2012 for a mix of 1.5c and zilch a pop. If none of the top 20 and board/management holders have sold out (FY15 annual report in August/Sept should shed some light, no big sells reported in Appendix 3Y from past 12 months), then where could this volume of systematic selling be possibly coming from? We have an associate director from Patos sitting on the board. Has anyone ever seen any research write-up or buy recommendation from the insto? Other major investors are steering well clear. 60% free float as at a couple of weeks ago. You can draw your own conclusion here.

2. Operational performance - As said in my earlier posts there's been no numbers reported to suggest that any of the underlying businesses have grown or improved, top-line or bottom-line, since being taken over by SHP. Homeappliances.com.au has been sitting idle for many months. Toystore has been plagued with issues when most items have been and are listed as out-of-stock and no one seems to care to fix it (do you ever see a big "sorry we're out of stock" sign stuck on the shop window when you go to Westfield for example?). The overall business remains sub-scale and still some way away from becoming cashflow positive.

3. Acquisitions and earn-outs - With the subdue share price the company decided to use script instead of cash to fund further acquisitions. As an example, Coppa backed his eStore into SHP a few months back. He's waiting on a few tranches of earn-out over the next 12 months, totalling to $1m (or equivalent to around 15% of the currently lowly market cap). Do you think that he'd rather see share price say at around 1.3c (get more shares issued for the lum sum), or price at say 2.3/2.7/3c (prices that other investors chipped in from previous CRs to fund acquisition of his business)? Would the share price magically stay low for the next 12 months? Similarly, Carosa backed the carcasses of Eljo/OHKI/Ezydirect into SHP for undisclosed sum, presumably at a low base. Once again up to you to put two and two together and draw your own conclusion.

4. Key personnel - Some of the old crew recently moved on, when all the employee options are under water with the weak share price. Under-incentivisation means unhappy staff and also means operational performance is sub-par. Simon's options aren't looking any healthier after already two years in the chair (average tenure of a CEO on the ASX is about four years). If the business continues to go no-where in the next 12 months, Simon could be looking for a new job.

Some think that by squeezing everyone else out over time would mean happy days when a pump comes along to engineer an exit and nice pay day. As more and more people get burnt and become better informed, one would wonder how they'd get their lion shares cashed out in the end. GEG has already been trying to flog off their retail business for some now seeing thin margins and marginal consumer sentiment (refer to recent AFR article). Can't see how anyone of the majors like JBH/DSH/HVN would even be interested in taking a peek at SHP as a target. In the meantime, the business continues to drift and a discounted CR at 1c is still a real possibility when cash continues to get burnt.

In the meantime, if you have been holding for more than 12 months and are prepared to do so for another 18 months or so whilst getting your shares further diluted, hold onto your hats cos can't see this thing going anywhere far in the near term.