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The Sirius Minerals share price: buy, sell or hold?

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It’s been a little while now since the long-term funding plan for Sirius Minerals (LSE: SXX) was finally put into place after months of speculation.

When I bought some Sirius Minerals shares in December 2016 at 18p apiece, early enthusiasts were talking up their hopes of a 10-bagger, 20-bagger, or even a 30-bagger.

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I can’t help thinking if you’d been able to present the current funding deal to those investors, they wouldn’t have liked it. Not the ‘sky’s the limit’ crowd who flock to new growth share stocks and push them along that familiar ride of booms and busts. But I also suspect some of the more rational investors, which I like to think includes me, would have had some reservations too.

Dilution

Though I knew there was going to be some dilution as the project needed to attract new cash for its development, I’d hoped for something less onerous than what we have — which is very much aligned with the interests of the new investors.

But the deal could have been a good deal worse. It was, after all, not the original arrangement the company had been pursuing for so long. But when the new opportunity came along at the last minute, those original plans suddenly took on hot potato characteristics and were summarily dropped.

We’ll never know the details of what we might have been stuck with. But at worst, I fear there was likely to have been a predatory aspect to it and we could have been close to being wiped out.

What now?

Anyway, all we can do now is look at what we’ve got and decide whether to hold, sell, or buy. With the shares have fallen further in the past month, we’re now looking at a price of 13.6p. It hasn’t been that low since early 2016 before the first big price spikes.

I think that illustrates the risks associated with getting in on a growth stock before there’s any way of putting any meaningful sums together. And it does strengthen the argument that it pays to wait until such times as you can see some figures that actually mean something.

It also makes me question why I bought such speculative resource-based shares when I almost invariably steer well clear of them these days. I would never, for example, go for a speculative oil explorer.

But one big difference is that, unlike those unproven oilies, with Sirius the stuff (in this case the polyhalite potash) is definitely there, we have a pretty good idea of how much if it there is, and we’re close to certain it can be extracted in large commercial quantities.

No numbers

We still can’t put meaningful P/E ratios and the like on Sirius Minerals shares, and the huge multi-bagger that was spoken of those few short years ago isn’t going to happen. But I think a three-bagger or even four-bagger by the time Sirius achieves profitability is a realistic possibility.

So Sirius Minerals is a hold for me, though I wouldn’t buy any more as I’m happy with the modest size of my holding.

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Alan Oscroft owns shares of Sirius Minerals. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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