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The AIM blunder stocks of 2018

We've looked at the AIM stocks that did wonderfully well in 2018 but into each life a little rain must fall so it is time to look at those stocks where the roof fell in
Arrow on a downtrend over stacks of coins
The value of investments can go down as well as up - sometimes spectacularly so

Stop me if you have heard something like this before but if you want to score a ten-bagger, AIM is probably the market in which to invest.

Having said that, it is also the market where you are most likely to score the lose your shirt.

READ The AIM Wonder stocks of 2018​

If at the start of 2018 you had shares in any of the stocks highlighted – or lowlighted, if you prefer – in this article and you are still holding them, you have my deepest sympathy.

All 10 of the worst performers lost nine-tenths or more of their market value in 2018. Half of them could justifiably be classified in the category of technology stocks: The People’s Operator; PhotonStar LED; Flowgroup; Xeros and IDE.

You can cheese off some of the people some of the time ...

The writing was on the wall for struggling mobile virtual network operator The People’s Operator PLC (LON:TPOP) at the end of December 2017 when it unveiled plans to raise yet another load of cash in a bid to stave off insolvency.

In December 2018, it appeared that it had avoided going the way of HMV by securing a proposal for major investment and funding from WWW Holding Company Limited, the majority owner of LycaMobile, the world's largest international mobile virtual network operator.

The shares have been suspended since July 2 after cratering at 0.01p. Don’t get too excited if they return from suspension sharply higher; the company is proposing a share consolidation that will see every batch of 2,000 shares replaced by one new one, so the share price will be rebased accordingly.

The PhotonStar LED Group PLC (LON:PSL) story is one where management saw that the existing business – fixed LED lighting – was on the road to nowhere and elected to switch to a more high-tech business based on a retrofit building control & cloud-based building management technology that uses the Internet of Things (IoT) to reduce operating costs for businesses.

The technology sounds impressive but it has not caught on in the market as quickly as management hoped; meanwhile, the company has bitten the bullet and placed its fixed lighting subsidiary into liquidation.

As with The People’s Operator, there is a chink of light at the end of the tunnel as the company recently strengthened its balance sheet through a share placing, albeit at a heavy discount.

READ PhotonStar LED bolsters its balance sheet with share placing to raise gross proceeds of £100,000

For Flowgroup PLC (LON:FLOW), the alternative energy group, there is no light at the end of the tunnel; there is not even a tunnel any more.

The company sold its core energy supply business and its microCHP boiler technology and intellectual property in April, and in November the administrators were called in. In December, the company’s AIM listing was cancelled.

The worryingly named Xeros Technology Group PLC (LON:XSG), which specialises in laundry technology, was something of an AIM star in the latter part of 2014 and early part of 2015 but it has soiled the bedclothes in 2018.

It is difficult to point to one single reason for the decline. Sure, its technology is balls – well, polymer beads to be precise – and it is still a long way from profitability but so are a lot of technology companies.

The final technology turkey was IDE Group Holdings PLC (LON:IDE), the network, cloud and IT managed services provider that spent most of 2018 desperately trying to reduce its cost base.

Bill Dobbie, who was interim chairman of the company at the time, undoubtedly gave my favourite chairman’s statement of the year in the company’s interim results, which were released in September.

“In terms of the results for the six months to 30 June 2018, having been a director of numerous companies over the years, I can safely say these are the worst set of results I have ever had to provide commentary for and there is nothing positive to point to,” Dobbie said.

August saw the company raise £5.55mln while in October, IDE completed its strategic review and sold one of its subsidiaries for £3mln. Sadly, the company parted ways with Mr Dobbie so the next set of results might not be so forthright but shareholders will be hoping they will at least show the company moving in the right direction.

The worst of the rest

The rest of the sorry lot in the worst 10 comprise Vinaland Limited (LON:VNL); Yu Group PLC (LON:YU.); Magnolia Petroleum PLC (LON:MAGP), Fastjet PLC (LON:FJET) and Faron Pharmaceuticals Oy.

There’s not much to say about Vinaland, the investment company focused on property investments in Vietnam except to say it is not the disaster story it might appear as the company has been wound down to a close with surplus funds distributed to shareholders.

Yü Group PLC (LON:YU.) lost more than 80% of its value on a single day after the supplier of electricity to small businesses slashed its full-year profit guidance to reflect accounting issues.

The black hole in the accounts did not create as much publicity as the bunfight over the accounts of Patisserie Holdings PLC (LON:CAKE) but they certainly took a large bite out of the share price.

Magnolia Petroleum, the US focused oil and gas exploration, bowed out in fairly ignominious fashion, selling off its Oklahoma and North Dakota assets to pay off some debt and then cancelling its listing in July.

The trajectory of African low-cost airline Fastjet has been earthbound for some time and 2018 was another tough year for the company.

READ fastjet shares nosedive as it warns it could go bust by the end of the month

The idea of a low-cost airline serving Africa still seems a good idea in principle, if not thus far in execution, as the company was able to raise US$24.4mln late in the year through the issue of equity.

Finally, Faron Pharmaceuticals is still hanging in there after a Phase III clinical trial of its lead drug Traumakine, which had performed well in an earlier study, produced inconsistent results in patients suffering acute respiratory distress syndrome (ARDS).

In December, it said it had gone some way to understanding why its phase III clinical trial on patients with a condition called acute respiratory distress syndrome didn’t yield the anticipated results.

It said its pharmacokinetic/dynamic study showed that the way it formulated its interferon-beta drug Traumakine was not an issue.

“While analysis continues, we believe the mixed results seen were due to a higher than anticipated placebo response due to high pneumonia portion, interference of corticosteroids on IFN-beta bioactivity and, as recently announced, the impact of a subgroup of patients' single nucleotide polymorphism C/T mutation in their interferon alpha and beta receptor gene,” said chief executive, Dr Markku Jalkanen.

READ Faron convinced Traumakine still has potential as an ARDS treatment

If Faron’s postulations are correct, the stock could bounce back in 2019.

Rank

Company

% Loss

1

The People’s Operator

99%

2

PhotonStar LED Group

98%

3

Flowgroup

97%

4

Vinaland

96%

5

Xeros Technology Group

94%

6

Yu Group

94%

7

Magnolia Petroleum

94%

8

Fastjet

93%

9

Faron Pharmaceuticals

93%

10

IDE Group Holdings

93%


 

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The People's Operator Timeline

Article
December 27 2018

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