Starvest (LON: SVE) shares are up 59%. The trigger for this is that SVE is actually going to wind itself up. This would be done by distributing the assets - mainly shares in Greatland Gold (LON: GGP) so that current Starvest shareholders own the stakes directly. The difficulty has long been that Starvest trades at a substantial discount to the market value of the assets held. Now, of course, every company says that it’s worth much more than the market says it does. But here the assets are in other traded stocks so there is good reason to be miffed about that discount to net asset value. Further, there’s very little reason to carry the costs of a listing if it’s value destroying in this manner.
The announcement: “The Company's Ordinary Shares trade at a substantial discount to the value of its underlying investments, including the Company's investment in Greatland Gold plc ("Greatland"), which represents the large majority of the Company's assets. As a result of the substantial and persistent discount of the Company's shares and market capitalisation to the underlying Net Asset Value (NAV) per share and NAV, the Directors have unanimously decided to recommend that the Company distribute its Greatland and Ariana Resources plc interests to the Company's Shareholders, by way of a capital distribution, so that they may potentially realise greater value from direct ownership of these underlying investments than is reflected in the Company's current share price.”
Starvest share price from Google Finance
We’ve talked before about Greatland Gold: “Greatland Gold (LON: GGP) shares are down 12% on another of their boring and not very interesting reports about Havieron. The base problem here is that there’s a large speculative investor base. Sure, we’re all going to get rich when the gold mine starts, right? And as far as we know, yes, Havieron is a decent gold deposit that will get developed at a profit. We’re not wholly sure of this as yet but it looks good at this stage. But this stage takes a long time - that’s what the problem is, Which is why we do get this series of announcements from GGP which tend not to really say all that much. Got to keep throwing that informational red meat to the speculators. Except given this stage of development it’s actually, informationally, pretty thin gruel.”
As you can guess from that we’re not huge fans of GGP. But the Starvest proposition was that SVE was an expensive way of holding, indirectly GGP shares. There seems to be little point in doing that so they’re suggesting, probably correctly, that they should stop doing that.
