UK 00:43 Tuesday, 6 October 2026
Breaking news and expert analysis on fast-moving AIM and LSE listed shares
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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 am beginning to think that my 1p target price for Gulf Keystone (GKP) is in fact far too generous. Having called this as a sell at 180p and all the way down to abuse from every moron in the land I think it is time to revise the target price. The shares are off another 9% today to just 4.675p. Okay I shall stop being a nice guy, I am cutting my target price from 1p to 0p.
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Comments
Evil Banksta
I’m sceptical of zero but think that somewhere around about 0.5p is a perfectly sensible target since that puts a value on the “co-operation of shareholders” (aka the market cap of GKP) at £5m. I would expect the bondholders to get swapped into equity but with the two bonds treated differently. The convertibles are unsecured (you note trading at 13% of par) and should be completely swapped to equity (perhaps reprice their warrants as well?). The guaranteed notes (guaranteed by Gulf Keystone Petroleum International Ltd) have a better credit status and greater frustration value because they’re closer to the operating assets. They may accept a haircut in return for some equity but should be expected to otherwise argue to retain a percentage of debt.
Both sets of bondholders will want a market into which they can sell their shares (if they’ve already gone short to hedge themselves then they’ll want a clean exit). There is value in shareholders agreeing to a D4E swap instead of forcing a liquidation, in terms of reduced legal expenses, continuity of a market listing, etc, etc. Cast your mind back to Marconi in the early noughties, for example, the company had a £600m market-cap post-restructure and the original shareholders took 0.5% of the equity – so £3m. More recently in the Uniq restructure, shareholders manged to wangle to retain £8m of value, whilst the pension fund took the rest.
All in all, assuming that the business doesn’t go completely south with unexpected liabilities being discovered (like Afren) then shareholders should expect around about £5m attributed as value to their cooperation and hence a share price of 0.5p. At that level the argument from the bondholders is simple: agree to the debt for equity swap and we’ll let you have £5m of value, don’t agree and that’s probably more than enough to pay the legal costs of a liquidation, and re-listing.
BlueFrew
I think that is an excellent piece of analysis from Evil Banksta.
However I don’t think he has fully considered the willingness of shareholders in these types of companies to commit hari-kari. Consider Afren and Petroceltic, where time and again shareholders have posted on the asylums about not letting bondholders get their shares. If they are going down, they are going to take everybody else with them. With Petroceltic they had a chance to salvage a small part of their investment by taking the 3p on offer from Worldview. But no, most of them are still there, clinging onto the mast as the good ship Petroceltic sinks below the waves.
Quite how most of these absolute cretins still have money I have no idea. Not that I should really complain. A large percentage of my gains on Afren came from shorting around 2p, when it was 100% certain that sub 1p was the very best result possible. Similarly a sizeable proportion of my Petroceltic winnings will be from selling between 7 and 8p when it was 3p or bust. I can see the same thing happening here with GKP. Shareholders will be as obstructive as possible until they are completely wiped out.
I think Tom will be proven correct. 0p and not even a consolatory bag of crisps for the GKP morons.
Evil Banksta
FWIW I’ve had a closer look at the numbers and given the additional capex that GKP require I’d amend my previous comment. I now expect both bonds to be swapped to equity in their entirety but with a much better return for the guaranteed bonds versus the convertible bonds. Some equity will need to be raised in addition and the bondholders will probably get first “dibs” in that.