A sucker punch, also known as a one hit punch, coward-punch, or king hit (Australian English), is a punch made without warning, allowing no time for preparation or defense on the part of the recipient. The term is generally used in situations where the way in which the punch has been delivered is considered unfair or unethical. In practice, this often includes punches delivered from close-range or behind.
The one-two sucker punch from Savannah Resources (LSE: SAV) – down 15.79% yesterday – confirms my already well-documented view that informed investors ought not to touch SAV with a bargepole.
The Sucker Punch
The two-pronged attack on shareholders by Savannah Resources began with their announcement last week that Savannah Resources and Rio Tinto are to establish an unincorporated joint venture ‘to combine adjacent Mutamba, Dongane and Jangamo prospects and Rio Tinto’s Chilubane heavy mineral sands occurrences’.
This sent the share price up like a rocket which made many of the Twitter loons very happy.
But shareholders are unhappy as yet again Savannah issued more shares – 21,900,000 at a price of 2.5p for approximately £550,000 – to prop up more of it’s swiss cheese making activities:
The net proceeds of the Placing will be used by the Group to fund work on the recently announced joint venture with Rio Tinto comprising the Mutamba/Jangamo heavy minerals sands project in Mozambique, including the definition of a JORC compliant resource and completion of the scoping study, as well as for general working capital purposes to support the Company.
This brings the total issued share capital to 249,401,573 ordinary shares.
One cynical line from the RNS stated that the funds were being raised at a 25% premium of the 20 day VWAP – this was the sucker punch.
It is just silly now because compared to a business like Pittards, Savannah Resources is just a fanciful little pre-revenue explorer engaged in value destruction.