Pearl Energy @ 1.02 ( Oil / Singapore ) 5 comments
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1.Doubts over surge immediately after IPO
Would you sell off an asset which you know could be worth or market-valued at 20% more in one to two months' time? Surely not. You would wait for the news to come through, then sell at that elevated price.
But the former illogical action is what Pearl Energy did when it listed at 70 cents in mid-April. Within weeks of its listing, it announced oil flows from several PSCs (Production Sharing Contracts) which moved its share price up to as high as 1.20 over the past two weeks. Why then, did it not wait and list at a higher price after all this news was announced? One possibility is that they were in urgent need of listing money which is probably not likely given that exploration and development expenses can often be classified under payables to be paid up from future oil flow revenues. The other possiblity, of course, is that the market's recent evaluation of what the company is worth (>1.00) is different from the insider investors' evaluation (0.70).
I would trust the insiders' judgment much more than the market's judgment, especially when the time difference when each judgment was made is only a matter of one month.
(1) The numerous events happening right after IPO
(2) An example of payment in kind from future oilflows by SPC