Wishbone Gold (LON: WSBN) shares have dropped 18% on Tuesday on the announcement that they have appointed a new broker. As we can see the price reaction is not a great vote of confidence here. But the interesting question is perhaps who is it not a vote of confidence in? The new broker? Or the company - why was there a change in broker that is?
Wishbone Gold itself is a junior gold miner - junior here meaning not producing as yet. The market capitalisation is £5 million or so, so it's not one of those organisations setting the markets alight. There are a number of prospects they are investigating in Australia and elsewhere - clearly none have been landed as high value proofs of mining potential as yet.
As is normal in this part of the life cycle for a would be miner expenses are paid out of shareholder capital. Given that there's no mine as yet there is no asset that can be borrowed against. Therefore Wishbone has to spend capital to get anything done. As we say, this is entirely normal at this stage.
Wishbone Gold share price from London Stock Exchange
As we can see from that wilting share price Wishbone could certainly use a new broker. Given the fall - again - in the price on the news that it is to be SP Angel perhaps that's not quite the right choice. But that would be to be uncharitable about SP Angel.
It's also possible to be more cynical. OK, so the share price hasn't done well, let's try and new broker. That could certainly be a motivation for the change. But there's another possibility, which is that the old broker was losing interest. That then being what prompts the change.
The reaction to a change in broker does depend upon why people think the broker was changed. Did the company jump or was it pushed? No, we don't know but it is possible - and most fun - to speculate.
Of course, the most reasonable way of boosting that share price would be to find substantial amounts of gold - that is what the company was constructed for after all. But sadly that's not something under management's direct control - there's always an element of luck as well.
A new broker could mean a new broom, much better communication with the market and so on. That would, in time, be beneficial to the Wishbone share price. But there's also that other possibility, that the old broker didn't think much could be done, or would happen, which is why the change. And if the broker loses confidence in a company then why should we have any?