1. Alberta Oilsands Inc. (TSX: V.AOS, Stock Forum) (10 cents)
https://www.aboilsands.ca/
Shares Outstanding: 212 million
Net Cash: Approx. $33.6 Million = 15.8 cents per share (Sept 30th)
Back in July I featured AOS at 11 cents hoping they would find a good use for their large bank account (a merger or acquisition). After waiting six months very little has been accomplished and Thursday they terminated their contract with AltaCorp who was tasked with finding them a “deal”.
I have heard that this board is very difficult to deal with and that has contributed to the delays. The company received the funds back in May 2015 and if they have been unable to find a proper use for the money, they should be winding up the company and paying the $33 Million out as a distribution – BEFORE they burn through a million dollars in wages, director and consulting fees.
Canadian microcap (penny stocks) have been through one of their toughest periods in decades (the TSXV is trading at an incredible low), and there are MANY companies that would die to have a bank account the size of AOS.
On Thursday as they announced the termination of AltaCorp, they said they would now be working with “one” person to source deals (?!)
I personally don’t understand how (or why) anyone would go from working with a company the size of AltaCorp to now working with a small boutique firm run by one individual – this makes NO sense. Is it a stall tactic to keep drawing management wages and director fees ? The fact they even chose this new route helps explain why AltaCorp had difficulty securing a transaction for them.
That is the risk from 10 cents – that they keep drawing this process out as long as possible.
As I mentioned, if they don’t identify a use for this money within six months, the smart thing would be to pay it out as a cash distribution. Should this happen, from 10 cents, this might be a pretty easy way to make 40% or 50% on your money.
If you have access to a strong project or company looking for money, they invite people to contact this new agent representing them. Just keep in mind – you may face some serious challenges dealing with this board of AOS. They seem to have a rather odd agenda.
Warren Holmes - Tiger Capital Advisors, at 403-860-1944 or at wholmes@shaw.ca
https://www.linkedin.com/in/warren-holmes-41a24250
AOS BACKGROUND
In 2014, as a result of an urban development plan for the city of Fort McMurray in northern Alberta, the government cancelled oil sands leases owned by AOS. This entitled the company to financial compensation which was received in Q2/15.
On May 26th 2015 the company announced they were in a possession of a cheque for $35,087,246.
While shareholders were hoping for more money in 2014, they were lucky the transaction happened when it did. With the collapse of oil in 2015, the interest (and value) of oil sands projects collapsed dramatically.
Below is an excerpt from their May 26th news release which showed their commitment to finding a new use for this war chest of cash:
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Strategic review process
As previously announced, in anticipation of receiving the compensation funds from Alberta Energy, the board initiated a process to identify, examine and consider a range of strategic alternatives available to the company and engaged AltaCorp Capital Inc. to assist the company with this process. As the company is now able to confirm receipt of the $35-million compensation amount, AltaCorp Capital will make available to qualified parties, upon execution of a standard non-disclosure agreement, access to proprietary technical, financial, legal and other information. The strategic review process is continuing at this time.
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While I am not a fan of their share structure (too much paper outstanding), this can be cleaned up once a proper merger or acquisition is found. The focus for now is speculating on the 40% discount to cash value – and whether than can (a) rebuild shareholder value BEYOND cash value or (b) pay out all the cash to shareholders and wind up the company in 2016.
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Disclosure (shares always purchased in the open market):
Danny Deadlock owns 250,000 shares of AOS.
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