Polymetal (LON: POLY) (NASDAQ: AUCOY) (NASDAQ: POYYF) is about to delist in London (the two American quotes are really gone already) and will pop up again as a Kazakh domiciled and quoted company. At some future but as yet unknown date.
This gives us all a wondrous speculation. But one which is of high risk – and unknown duration. It’s therefore a speculation – a bet if we prefer – that cannot be financed. Not with leverage (borrowing) and there’s no instrument we can use. Other than actually buying stock, waiting for the paperwork to be done and then seeing.
Polymetal’s problems with Russia and sanctions
The background here is that Polymetal is a gold miner in Russian and Kazakhstan. The company itself is not sanctioned – the Russian subsidiary newly is. They continue to operate. Their costs have gone up as the globally excellent contractors can’t work for them and they’ve got to use more expensive locals. But they continue to mine gold, sell it and on that basis alone, purely that basis, they’re worth much more than their current £1 billion or so market capitalisation.
They do have problems though. Euroclear no longer speaks to NDS (the Russian share registrar) so it’s not possible to pay a dividend as they don’t know who the Russian shareholders are. So, the plan is to try and get around this. Move the company itself from Jersey to Kazakhstan. Then relist the company on the Kazakh market. All of the extant shares in the London (and Moscow, plus the US ADRs, the extant Kazakh quote) quote should transfer over. At the same time, sell off the sanctioned Russian company and be a pure Kazakh gold play quoted in Kazakhstan – no sanctions problems then.
The plan could work for POLY
Well, OK, this could work. But as a shareholder there would be some work to do – along with the biting of nails over whether it will work.
Now, to switch examples. Altyn Gold (nothing to do with Russia or sanctions) recently delayed its accounts by a week. As it was out of time the shares were suspended – the news they would be suspended sent ALTN down 20%. A week later the quote was restored as the accounts had been published and Altyn went up 20%. Now, sitting for a week in untradeable – because no quote – shares isn’t a happy time. But 20% in a week is pretty good.
Some people will be so horrified by the idea of owning a suspended or even delisted Polymetal that they will sell at any price. Actually, quite a lot have. Others will think the Kazakh valuation will be lower and so will sell. But if the Kazakh quote actually solves all the problems, then perhaps POLY valuation will go up. Strongly up that is – hundreds of percent perhaps. This is one of those Warren Buffett times of blood on the floor perhaps. For the bet is that many will not be willing to go through that risk period before the new domiciliation and listing. But, what will be the rewards of having the brass cojones to take that risk?
This must be a cash trade, from own resources
There’s no way that I can see of leveraging this. Because anyone willing to lend against a position will want to have the security of a marketable security for the lending. This also means that contracts for difference don’t work. The only possible way would be to buy stock with real and actual money, get the certificates then sit and wait. This obviously limits the size of any position that it would be sensible to take.
The point would be that as the delisting date approaches – Polymetal has just announced that as being 1 August – then the price is going to decline markedly. I think it’s already grossly undervalued in fact, but it might get worse. So, buy in getting close to that delisting date. Then deal with all the necessary paperwork and wait.
There’s also another possibility – POLY is currently quoted in Kazakhstan, entirely fungible with the London stock. That quote is going to be suspended too. But buying in Almaty to hold would cut out some of the paperwork steps at least.
By the way, don’t even think of trying to trade the MOEX, or Moscow, quote. That is sanctioned. Plus, under Russian law, as a foreigner you can’t sell either.
Polymetal is not a simple speculation but it could be a good one.
Yes, yes, I agree, this all seems very complicated and it’s most certainly not the easy trade we’d all prefer. But the gamble is that the Polymetal price is depressed purely and solely because of the upcoming suspension and delisting. So, buy at depressed prices and await the Kazak redomiciliation and relisting. The thing is we know, absolutely, that the price is currently depressed for exactly this reason. The uncertainty is whether it will rise again once all this is past.
Well, how brass are those cojones?
