Check out the chart above! It’s that of Union Dicon Salt Plc a company that has been moribund in the last five years only just releasing its 2011 results some months back. However, their share price is up 62% within two weeks after being flat for about 3 years without a movement. So why is the stock rising?
Well, the company announced recently that it had just entered into a Technical Management Agreement with CBO Capital Partners Limited, an advisory and Project Development Company. Newspaper reports also indicate the deal will involve an investment of about N8billion in Union Dicon Salt Plc.
But is this why the share price should be rising at this rate? Speculators don’t really care much. Every piece of news is an opportunity to trade regardless of the risk. For cautious value investors out there, we resist such temptation and sentiments. Union Dicon Salt has posted no revenue since 2007 and that year, revenue was N111.7million. Rather what it shows are losses that have ballooned to N1.8billion.
The new deal is a good step in the right direction but not evident that a turn around is achievable within any period.