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JJB Sports (JJB) shares now trade at 0.32p valuing the company at just under £1 million. Quite amazingly there are still a few prize loons out there who think this Aim listed retailer is some sort of penny share punt and are “buying for recovery.” They are mad. This stock is utterly worthless and if you can realise enough after trading costs by selling what shares you have you should do so even at this price. This is not a call to short, I imagine that it is very hard to do so but I cannot see how the end game here is much different from 0p.
On August 30th the company announced that trading had continued to get worse since its last profits warning and that it could therefore not raise the cash needed to implement a turnaround plan. Thus it was putting all its assets up for sale. But with debts of £36.35 million to satisfy (and I imagine that the overdraft is growing) plus creditors, plus the costs of a sale process (KPMG are not cheap) it admits that “There can be no certainty that a proposal will be forthcoming or that an offer will be made for the Company or as to the level of any proposal or offer that may be made. “
So if there is no offer, shareholders lose everything. If there is an offer there is no guarantee that there will be anything left for shareholders. Indeed why should there be? What is the intrinsic value of a company drowning in debt and burning cash and needing vast amounts of capital to turn it around? Er norra lot. The idea that someone is going to take away all the business assets and liabilities and all the PLC liabilities and leave something for this to be a cash shell is just inconceivable.
As such if you buy the shares today you are, almost certainly, looking at a 100% loss within a few months. If you can sell and realise any cash after costs you should do so now. You may only have enough for a good meal at my very own Real Man Pizza Company on the Clerkenwell Road ( wine of the month for September a very interesting Chilean offering at just £4 a glass) but that is better than nothing. A lot better as it happens!
Those prize loons that ignored this advice and in fact bought may be tempted to take their 50% profit or hold on for more. Nice position to be in. Good call Tom.
Most prize loons should be 100% up by now! Sell all, half or wait for more? What a position to be in.