Tuesday, February 7, 2012

Bandanna Energy - Bidders back?

I was alerted to Bandanna Energy (BND) recently when the stock had a massive volume day of over 26.2 million units Thursday last week (02/02/2012).  The stock surged up $0.105 to $0.76 on that day.  Considering the stock hasn't seen that much of a daily volume for years it went on my watchlist.

I've been looking further into the stock over the last few days.  Last year the company effectively put itself up for sale with potential acquirers running the ruler over the company.  Bandanna Energy also had employed corporate advisors to assist in the process.

Unfortunately the bidders evaporated and the company put that down to deteriorating and/or poor conditions on equity and credit markets.  In the end BND raised $100 million in funds from Insto investors at a price of $1 per share plus a further $1.1 million from retail investors.  The insto entitlement offer was oversubscribed however the retail entitlements were poorly subscribed to as the market price dipped below $1 issue price.

One has to wonder if a bidder is revisiting BND.  After all, market conditions are a lot brighter.  The ASX trading band has tightened to 4200 - 4300, there are excellent signs coming out of the US and a Greek debt default appears slimmer.  Interestingly enough the RBA decided today to keep the cash rate on hold citing these reasons, which startled the market.  The ASX 200 dropped after the news whilst the Australian Dollar surged.

The volume on 02/02/2012 could be a very good signal.  Should a bidder come for BND you would expect that it would have to exceed the recent raising completed at $1 which leaves a lot of upside.  You've also got to remember that even if a bidder doesn't appear the stock was over $2 only six months ago.  There's recovery in it at least.

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