White Nile to free stock to ‘bail out’ short sellers
By Simeon Kerr
DUBAI, May 28, 2005 (Dow Jones) — White Nile Ltd. (WNL.LN) says it will allow its institutional investors next week to unlock some stock to provide liquidity for short-sellers to close their positions.
In an interview with Dow Jones Newswires on Saturday, Andrew Groves, one of the company’s co-founders and development director, said London’s Alternative Investment Market, or AIM, asked the oil exploration company to make available stock held by “irrevocable” investors to allow settlement of short positions – thereby returning orderliness to the market.
“The shorters have got themselves into a pickle,” said Groves. “Now the company has been asked to bail out the shorts – we’re in the driving seat.”
Groves said White Nile’s stockbrokers, along with other institutional investors, starting Tuesday would offer stock to those in short positions at prices of more than 140 pence a share.
“I know that one institution is only going to sell at 170p,” he said. London markets are closed this Monday for a bank holiday.
When AIM suspended the stock Friday, the share price stood at 141 pence. White Nile reopened for trading May 23 after a three-month suspension during which the company prepared a dossier detailing its oil-development concession in southern Sudan.
Groves questioned the logic that led so many speculators to short the stock, betting that its value would decline. He said it was always clear the stock wouldn’t be liquid as more than 99% of the stock was held by “irrevocable” investors, who previously weren’t allowed to sell.
“These speculators were shorting a company they didn’t know anything about,” Groves said.
The deal has sparked controversy, not only highlighting the volatile nature of trading on natural resources companies on London’s AIM, but also stirring political sensitivities at the heart of the Sudanese peace process.
A comprehensive peace deal in January ended 25 years of north-south civil war in Africa’s largest nation, granting the mainly black, non-Muslim south significant autonomy from the northern Arab Muslim government.
The southern government-in-formation in February finalized a deal awarding White Nile a 60% stake in Block Ba, a 67,000 square kilometer block that is part of a larger area claimed by French major Total SA (TOT), Marathon Oil (MRO) and the foreign arm of Kuwait Petroleum Corp. (KPT.YY).
The remaining 40% of Block Ba is held by Nile Petroleum Corp., the southern government’s national oil company.
White Nile is holding an extraordinary general meeting on June 16, when shareholders will vote on a reverse takeover that would allow Nile Petroleum Corp. to take a 50% stake in the firm through the issuance of 155 million shares.
The firm’s institutional investors, who will next week unlock their shares to create liquidity in the stock, have all given “irrevocable undertakings” to support the reverse takeover that will put the company under the control of the southern Sudanese authorities.
White Nile Friday said in a statement Friday that it would allow these “irrevocable” investors, which include firms such as US Global Investors Inc., to sell up to 35% of their holding in the oil minnow.
Total, which revived a dormant production agreement with Sudan’s central government in Khartoum last January, continues to assert its rights to the block.
As part of the peace process, a national petroleum commission will be set up to adjudicate between the north and south on oil matters.
The nascent southern authorities say they took legal control of oil fields under its control last July with the formation of Nile Petroleum Corp.
As White Nile’s acreage lies within areas under the south’s military control, the southern government – which will be formally inaugurated during the summer – will decide who can prospect for hydrocarbons in those areas.
Indeed, White Nile is going ahead despite Total’s claim. The firm plans to start seismic surveys on the acreage, which it regards as highly prospective, within a couple of weeks, Groves said.
White Nile’s announcement Friday of its plan to place shares came three days after Groves, the company co-founder, bought GBP48,000 worth of stock. In a regulatory disclosure Thursday, White Nile said Groves purchased 40,000 ordinary shares at market price, which was around 120 pence each at the time of purchase Tuesday, May 24.
A spokesperson for the Financial Services Authority, which regulates U.K. stock markets, said regulators might look at a director’s stock purchase if he had been aware of an unannounced share placing at the time of the trade.
Groves, however, said White Nile decided on the share placement Friday, May 27, and not on May 24, the day he purchased the shares.
Groves and cofounder Phil Edmonds were in the United Arab Emirates Thursday and Friday meeting with potential investors.