Pilbara Minerals at Risk: Can Resource Sector Research Make a Difference?
Pilbara Minerals (PLS:AX) is shaping up as another value trap casualty. The company released a commissioned research report on Tuesday suggesting a valuation of more than four times the company’s current share price. Publication might be just in the nick of time if the attached price chart is any guide. The company’s share price has been losing momentum with declining volumes as the number of investors familiar with the company, and who had not already reacted to the investment proposition, has fallen. The problem - in common with other companies in the sector - is that the share price fall implied by the chart will force an increase in the number of shares required to fund the next stage of development putting further downward pressure on the share price and quickly eroding the value proposition. The company will find itself trapped by a cycle of falling prices and growing share issuance. Pilbara Minerals is a real time test of the effectiveness of resource sector equity research in raising fresh investor interest to avert this threat.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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