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Crown Ocean – a confident show of force?

This morning Bowleven announced that Crown Ocean has increased its stake in the company to 14.87%. This is an interesting move from the Monaco based investment house and suggests it is confident boardroom heads are about to roll.

According to the TR1, Crown Ocean took its stake above 14% last Wednesday. During that day’s trading session Bowleven’s shares traded in a range of 26.71p to 27.7p. They closed at 27.25p. Given that the company had cash worth just shy of 24p per share on New Year’s Eve, this looks like the highest premium the investor has yet paid above the company’s cash balance for Bowleven stock. The timing could be significant.

When Crown Ocean built its original stake in Bowleven last year it did so predominantly at a discount to cash or at a slight premium. For Crown Ocean to have bought a further 1.7% of the company at this point and at these prices appears telling.

Based on the voting figures at last December’s AGM, it seems that Crown Ocean needs the support of about another 6.3% of the company (20million shares) for its resolutions to be approved. It is possible that the race is close and Crown Ocean feels it needs to buy more shares to get its proposals over the line. However, based on the number of private shareholders who have contacted this site and claim to support change, it is hard to foresee anything other than a landslide in favour of removing Hart and his fellow directors from their posts.

What seems far more probable is that Crown Ocean believes the vote is heading its way and expects the wholesale clear out of the board will act as a catalyst for the market to rerate the value of this stock. Bowleven’s shareholders have long believed that Etinde is a wonderful asset. It has been a humiliating failure for the current board that the market has essentially written its value to zero for most of the last few years. A reinvigorated board and streamlined operation could change all this.

If Crown Ocean is betting on this outcome, it is encouraging that it sees sufficient upside from current levels to justify the risk of buying more shares.