Disclosure: The author has a short position in one or more of the shares mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
I've sold short in Tungsten (TUNG) at 208p and here's why.
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Comments
wildrides
stupid name for an e invoicing outsource company ……….what were they thinking ?
Paul Scott
Hi Matt,
Interesting article. Surely you’re missing the key point though? Which is that Tungsten is not really interested in e-invoicing per se. Instead the company has bought a bank, and is using e-invoicing as a platform for seamlessly lending to captive supplier base of large organisations, through invoice discounting.
That’s where the profits will come from. Also, I find is strange the way you gloss over the Insight deal, which is of massive significance, giving TUNG the money it needs to roll-out the invoice discounting to the enormous supplier base of its customers.
Although I do fully accept your point that forecasts have been pushed out considerably, and the cash burn is a concern. The company may indeed need to raise some more cash. However, there was plenty of appetitie before, indeed Directors stumped up several million quid in the last financing.
I’m long of TUNG, but I welcome views from a bear.
Personally I’m prepared to look through any short term weakness in the share price, as this is a 5-year investment for me. By that time TUNG will either have disappointed, or will have been a major multi-bagger.
You didn’t mention the very strong CVs of management by the way. That’s worth considering. These are experienced people who have a background of making things happen. Not to be dismissed lightly.
Regards, Paul.
J P Spaghetti
I’ll let you into a little known tungsten trading secret (just keep it between us). Whenever the price has completed a classic “W” shape, it’s time to plunge in! And the more level the tops and bottoms of the letter the stronger the buying signal. Or perhaps I’m getting confused…
How do you see the mid- to long-term future for vanadium, by the way (if you don’t mind)? Oh, and be careful to not confuse a double vanadium buying signal with a single tungsten one!
alcira16247
Matt
Great piece of in depth analysis, provoking a opposing view from Paul Scott. Thanks too, for your posting, Mr Scott.
Being able to assess the opinions from two such highly respected commentators is indicative to the outstanding investor information and research available on ShareProphets.
I’ve had Tungsten on my watch-list since they posted their last figures and reading Paul Scott’s previous bullish statements on the firms prospects.
I’ve been dithering whether to buy, now your article has given me further food for thought.
Paul Scott
To add to my previous comments, there’s nothing actually new in Matt’s original article.
The market already knew that TUNG has disappointed against original expectations. That’s why the share have already halved from a peak of c.400p to just over 200p now.
So my question to Matt is this – aren’t you rather late to the shorting party? Surely the time to short it was when people were wildly excited about the stock at 400p? Do you not think that the share price has already factored in all the things which you refer to, none of which is new information? In fact, as I see it, your article gives an explanation for why the shares have fallen by half, but the comparison with a pure E-invoicing company is completely spurious, as investors in TUNG are buying into an invoice discounting company – i.e. effectively a bank, which gets its customers via an e-invoicing software.
The key product is only being rolled out now, so the historic figures are essentially set-up costs.
I think you need to do some more research on what is behind the bull case.
Although as mentioned earlier, I take on board your point that TUNG has disappointed short term, and might need to raise some more equity. I don’t see that as a problem long term, but it could cause some more short term share price weakness.
Equally, if you’re short, and on the wrong side of a big announcement, you’re going to get skewered – look at the big price moves up in the past. I hope you’ve budgeted for being maybe 50% offside in 2 days, as that’s the kind of move up this stock has done in the past on good news.
Anyway, happy to have a bull-bear discussion. No need for acrimony, all views are welcome.
You see, shareholders in QPP, AFR, NBU, etc. This is the way to do it. I don’t accuse Matt of being an evil, lying shorter. I just discuss the facts & our views. He is free to short TUNG if he wants to, it doesn’t bother me at all. I think he has some good points, but overall is probably more wrong than right in the long term. He could scalp 20% off it in the short term perhaps, who knows? All part of the fun. If you can’t cope with being 20% offside, or more, then you shouldn’t be investing in shares at all.
In this case, Matt has given a view, explained his reasoning, absolutely fine.
As regards the % of FTSE 100 cos, Fortune 500, etc. I think that’s fairly standard spiel for all salespeople! You may well sell to a subsidiary of a FTSE 100 company, and can chalk that up as a success, but that’s very different to claiming that you have complete coverage of all subsidiaries in a FTSE 100 company.
Regards, Paul.
Midd365
“As far as I can tell, there has been no mention of either Blackstone Tactical Opportunities or the British Investment Bank in the six or so months since they were highlighted as talking to them.”
For your information, there was in fact an update provided during the investor/analyst interim results webcast last month on the discussions with Blackstone. The reason these haven’t progressed is that the offering from Insight was far superior e.g. Insight could provide more funding and were willing to bear the credit risk of the invoice discounting facility (whereas Blackstone weren’t). Admittedly there hasn’t been an update on the British Business Bank application but isn’t this irrelevant given the Insight deal?
In terms of comparisons with Direct Insite, do they also own a bank? The Tungsten proposition is something much more than just an e-invoicing platform.
I agree Tungsten is likely to need to raise more cash at some point this year.