Today’s Small-Cap Disasters: Concha PLC, Circle Oil plc And Audioboom Group PLC

Shares in Circle Oil (LSE: COP) are sliding today after the company said that following the plunge in oil prices, the group may be forced into a debt restructuring or rights issue as it struggles to reach an agreement with one of its lenders. Clearly, this is a huge blow for Circle and the company’s shareholders. 

Indeed, only a year or so ago, Circle seemed to have a bright future with a market cap in excess of £100m and a cash-rich balance sheet. But the plunging price of oil and an expensive exploration programme have taken their toll on Circle’s balance sheet.

At the end of September, the company reported that during the first-half its net debt pile had ballooned to $64m, and sales had fallen 50% year-on-year.

Circle’s market cap has slumped to £16.6m at time of writing, or around $25m. So Circle’s net debt now exceeds the company’s market value by two-and-a-half times. As a result, it could be wise to avoid Circle for the time being. 

Continued sell-off

It’s also shaping up to be another bad day for Concha (LSE: CHA). Shares in the company have fallen 16% on the day at time of writing, adding to last week’s declines. Over the last three business days, Concha’s shares have lost 65% of their value, although there’s been little in the way of news to explain the decline. 

Concha’s shares slumped 52% last Thursday, which prompted the company’s management to issue a statement saying that the group was “not aware” of any press speculation that may have contributed to the recent volatility in its share price.

The company’s last market update was back in September when management revealed that the investment company was evaluating a “specific global opportunity within its investment scope.” Last week Concha’s management confirmed that “discussions are continuing” although “there can be no guarantee that this investment will be successfully completed.” It seems as if the market has taken this statement badly.

Unfortunately, there could be further declines to come as, Concha’s book value is only around 0.35p based on year-end 2014 figures. Unless the company makes a high profile investment soon, its shares could fall back to the 0.35p support level. 

Profit warning 

Shares in Audioboom (LSE: BOOM) are also under pressure today after the company reported its full-year results for the year to November. They fell significantly short of market expectations. What’s more, the company doesn’t expect to become cash flow positive until 2017 implying that two more years of uncertainty and fund raisings could be ahead for the group. 

According to today’s year-end trading update, Audioboom’s real revenue growth only began towards the end of its fourth quarter, with revenue in the period more than double the previous three quarters combined. And the company expects this trend to continue into Q1 of the next year. As a result, management expects the shift in timing and pace of adoption will hit its expected full year revenues for 2016. 

All in all, this was a pretty dismal trading update from Audioboom and it was, in many ways, a multi-year profit warning.