First recipients of this ‘please explain’ request for the people who issue ‘please explain’ requests would be those in charge of the over-the-counter market in the US, a wild place sometimes known as the Pink Sheets.
Second recipient would be the crew at ASX Group who run the Australian Securities Exchange, and who have recently been so busy issuing their own ‘please explain’ notices that they do not appear to have had time to consider the answers – or do anything else than issue more ‘please explain’ letters.
In the US the company making headlines on the OTC is a social media stock called Cynk Technology which rose by 36,000% in a matter of days to be valued at $US6 billion even though it admitted it had few assets, no revenue and might struggle to survive.
Farcical trading in Cynk continued for several weeks until the US government’s corporate cop, the Securities and Exchange Commission, stepped in on Friday and suspended trading. Until then, all that the OTC regulators had done was put a skull and crossbones alongside the stock’s quote, a warning that something suspicious was happening – while trading continued.
In Australia the government regulator has not stepped in, yet, to take a closer look at the local stock which has been raising eyebrows almost as fast as it has been lifting its share price.
Fifth Element Resources is the company which has become the talk of the mining world because it doesn’t yet have a mine, doesn’t appear to have done much exploration on its gold and copper tenements in the Lachlan Fold belt of New South Wales, but does have a share price which has risen almost as spectacularly as Cynk.
Listed on May 21, Fifth Element’s A20c shares closed on Friday at $7.50, a rise of 3650% over 58 trading days, and after five ‘please explain’ notices which, in this case can genuinely be called speeding tickets.
The latest ‘please explain’ was sent to Fifth Element last Tuesday with a reply received on the same day, and along the lines of the previous four speeding tickets, with management saying it is “not aware of any information” that could explain the share-price rise and that the company is in compliance with listing rules.
Shortly after that brief exchange the stock’s share price resumed its upward run, jumping from $5.33 to $6.39 on Thursday, and then up to a closing price of $7.50 on Friday in astonishingly thin trading that saw just 100 shares exchanged, but which left the stock with a market value of $164 million.
Share prices are one aspect to Fifth Element that Dryblower really cannot fathom, and he is very surprised that the people running the ASX are not equally curious, and that’s the number of shareholders; 13.
When Dryblower first saw a MiningNews.net report which noted that Fifth Element had just 13 shareholders he assumed, incorrectly, that it was a misprint, or a joke.
But, for anyone else who doubts that there really is an ASX listed company with a skyrocket share price and just 13 shareholders take a look at last Tuesday’s official filing by Fifth Element at the ASX – clickhere
Fifth Element is not alone in receiving ‘please explain’ requests from the ASX, but what concerns Dryblower is whether anyone at the ASX is thinking about the answers or are they just dumped in a file marked: “pointless inquiries – no further action required”
A quick trawl late last week through listed mining stocks revealed at least four other companies which received ‘please explain’ letters after their share prices rose sharply; Yellow Rock Resources, Syrah Resources, Chinalco Yunnan Copper and TNG.
Add those to that sent to Fifth Element and there were at least five ‘please explain’ letters emailed out by ASX regulators in a process which probably makes them feel better, or at least feel that they’re doing their job, but which can hardly be called a satisfactory situation for investors.
The process of asking a company whether it is complying with listing requirements is part of the self-regulation process but that’s all it is, a step which invariably achieves nothing.
The Cynk case in the US and the Fifth Element case in Australia are spectacular examples of why market regulators need to be far more inquisitive about trading in a company’s shares so that investors are confident that all the information needed to make an informed decision is available to them.
Fifth Element can probably argue that its shareholders are fully informed, all 13 of them, but the rest of the investing public can merely wonder what on earth is happening at a company which apparently passes all the requirements to have a stock exchange listing, one of which says a company must have at least 300 shareholders.
- Dryblower’ draft letter to the ASX begins with these words: please explain the 287 shareholder gap at Fifth Element?