Ajax Resources (LON: AJAX) shares are up 33% today. As to why AJAX might have risen by one third well, your guess is as good as anyone else’s. For the company doesn’t actually do anything. It’s just an empty shell, a chas shell to use the old London market terms. In more modern language it’s a SPAC. Which means that there’s no possibility of working out what’s happening within the business, or what that might mean for profits or the future, as nothing does happen within the company. A fairly basic problem with valuation there, obviously.
The actual description the company gives: “Ajax Resources Plc is a Special Purpose Acquisition Company (SPAC) listed on the FCA Official List and admitted to trading on the Main Market for listed securities of the London Stock Exchange” Which is fair enough.
The game plan is to be there, as a listed entity, which can then purchase decent resource assets by issuing shares to the sellers. Or, perhaps, organise a reverse takeover in common with the American style of Spac.
We’d be very slightly worried about this: “Notably, he managed the exploration team that uncovered a super-giant rare earth deposit in Greenland.” But being on the geology team isn’t quite the same as having been the financial management of that project which we’re not hugely in favour of.
Ajax Resources share price from Google Finance
But how to value this? And what changes that value? Given that nothing actually happens within the company it can only be rumour about what might be the takeover or merger target. We’ve heard nothing - but our information sources are not perfect. But that tells us what the problem is for any retail shareholder in trading here. It will be that possible takeover target that changes the value of Ajax Resources. And therefore it will be rumours - even dreams - about what it will be that move the share price.
Retail investors, being further away from the rumour mill, will simply get that information late, if at all. Even after this price move no one really knows why the price has moved - this isn’t something that can usefully have a trading strategy applied to it therefore.
