• Looking after yourself!


    One must admire Doctor North’s perseverance and tenacity in his continuing analysis of the folly that this the UK’s approach to Brexit.
    GOTO: https://www.turbulenttimes.co.uk/news/brexit/brexit-playing-games/
    Of course, had the government to cope with Brexit alone, this would have been a monumental challenge. However, they now have the corona virus to deal with as well. And if that was not enough, there is the very dicey international situation as well.

    Well, they do say that troubles, like buses, come in threes!

    For myself, my attention is focused on my shareholding of Royal Dutch Shell “B” shares. That the RDSB price will bounce back is not in doubt. It is a question of what to and when and not if.

    At the moment my cost per share is £18.90.

    My chief worry is not that Shell will go bust. It won’t. It is that a US oil major will take advantage of the present situation and take the company over in a cash deal. What this will mean is that I would receive cash for my shares. Shell closed at around £9.50 a share on Friday which meant that at that price my loss per share would be £9.40 – a huge amount of money for me and a financial disaster. However, were a takeover in the wings, the share price would soar, but it would NOT soar all the way to £18.90!

    I could reduce my cost per share by purchasing more shares at the current low prices. However, my resources are strained and I don’t have significant funds to invest. Furthermore, the cost per share needs to be reduced dramatically.

    What this means is that I have to adopt a policy of “wait and see”. I expect the Shell share price to drop significantly early in the New Year if the fears of Doctor North vis-à-vis Brexit are borne out.

    It is just a matter of how far does the price drop. The further it drops the more shares I can get for my money. At the same time, the further it drops the more likely a takeover bid will emerge.

    Of course, I am not alone in my fears. This same problem will be currently occupying the mind of Shell’s CEO, Mr van Buerden!

    And Royal Dutch Shell is not the only oil major in the same quagmire! BP is as well. BP is in fact in a worse position than Shell as it’s market capitalisation is a fraction of Shell’s and thus presents a much more manageable takeover target! We can be sure that this “little local difficulty” is front and centre of the mind of Mr Looney, CEO of BP!

    The solution would appear to be staring both men in the face: A merger!

    However, there are four matters of difficulty that have to be dealt with before any such merger can take place. They are in order:
    #1: The EU’s competition authority.
    #2: The UK’s competition authority.
    #3: The Dutch government.
    #4: The UK government.

    IF a merger can be agreed, it would enable the new entity to rationalise the combined operation and improve the balance sheet considerably. It would mean closures and redundancies. Today this is known as “securing cost synergies” – which sounds nicer than a “programme of closures and redundancies.”

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