London to set up disciplinary inquiry into White Nile

By Stephen Foley, The Independent

LONDON, Feb 28, 2005 — The London Stock Exchange is planning to appoint an independent disciplinary panel to examine White Nile, the new cash shell company chaired by Phil Edmonds, whose shares are suspended after surging 1,285 per cent in a week.

The extraordinary performance of the stock and the company’s promised investment in a giant oilfield in the recently autonomous southern Sudan have attracted the careful scrutiny of the LSE, which regulates the junior AIM market. A disciplinary panel is appointed to examine evidence of possible breaches of AIM rules. It is composed of “market participants”, including nominated advisers, lawyers and brokers. Companies or their nominated advisers can be censured or fined, and the shares delisted on its recommendation.

White Nile’s nominated adviser is Grant Thornton, and a former partner, Brian Moritz, sits on the board – as he does at several Edmonds companies.

Mr Edmonds, a former England bowler, bought shares at 0.1p when White Nile was founded as a cash shell and, having raised £9m, the company was floated at 10p a share on 10 February. It was suspended six days later after having been chased up to 138.5p. It said it was days away from a deal with the south Sudan government being established as part of a ceasefire agreement with the country’s central government.

Details of the deal, believed to be via a joint venture majority-owned by the new government, are a week overdue already. White Nile and the Exchange are at loggerheads over whether the deal counts as a reverse takeover requiring a new prospectus. Meanwhile, Sudan’s central government is at loggerheads with the nascent authority in the south over who has the right to parcel out drilling permits in the Muglad region, along the country’s north/south divide. The central government recently revived an oil exploration pact with the global giant Total, which claims rights over the oilfield. A Sudanese newspaper at the weekend said that the peace deal might be threatened by the dispute. There are plenty of issues to be examined by the Exchange.

Two more. Has the controversy damaged the reputation of AIM, a problem with some cash shells which is increasingly exercising the Exchange? And does the massive short position in the stock, widely believed to exceed the free float, mean that an orderly market in the stock is impossible, even if it is able to return from suspension?