Investors have turned their noses up at Thungela Resources, the London-and-Johannesburg-listed South African coal business spun out of Anglo American. Its shares slumped from 150p to 113p on its first day of trading in London on Monday, says Neil Hume in the Financial Times.
One problem was that many big funds cannot hold Thungela because it has a market cap of only £150m, and is thus too small to meet their investment mandates. However, the flop also suggests that markets are only approaching coal stocks with “an extremely long barge pole”, says Ed Cropley on Breakingviews. Nevertheless, despite its poor reputation, coal could have “a long future”, as some analysts reckon it will still comprise 31% of global power generation in 2030, thanks chiefly to South Asian economies “being slow to switch to green energy”.
What’s more, with “minimal investment” in new mines, there’s even an argument that supply “will shrink faster than demand, pushing prices up”. Either way, for companies such as Thungela and larger rival Glencore, there’s another “decade or more of money to be made”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Not so fast, says Oliver Gill in The Daily Telegraph. Anglo-American estimated prior to the float that the company was worth around £500m. However, “secretive research outfit” Boatman Capital says that Anglo’s valuation was not only based on an “over-optimistic forecast of coal prices”, but also ignored a “slew of additional costs”, especially those related to the clean-up of the mines. Their conclusion? The value of Thungela Resources is “zero”.
-
Pension warning: one in five don’t know how much is going into their pensionHow to check your pension contributions and why it matters
-
50,000 power of attorney applications rejected – how to avoid common mistakesA freedom of information request shows that thousands of lasting power of attorney (LPA) applications are rejected due to errors. We explain how to avoid mistakes and reveal tips to make the process as straightforward as possible
-
Investing in a dangerous world: key takeaways from the MoneyWeek SummitIf you couldn’t get a ticket to MoneyWeek’s summit, here’s an overview of what you missed
-
DCC: a top-notch company going cheapDCC has a stellar long-term record and promising prospects. It has been unfairly marked down
-
How investors can use options to navigate a turbulent worldExplainer Options can be a useful solution for investors to protect and grow their wealth in volatile times.
-
Invest in Hilton Foods: a tasty UK food supplierHilton Foods is a keenly priced opportunity in an unglamorous sector
-
HSBC stocks jump – is its cost-cutting plan already paying off?HSBC's reorganisation has left questions unanswered, but otherwise the banking sector is in robust health
-
Lock in an 11% yield with SabreTips Sabre, a best-in-class company is undervalued due to low profits in the motor insurance industry. Should you invest?
-
Byju’s – the startling rise and fallIndia’s educational technology start-up Byju's attracted big-name backers and soared to vertiginous heights during Covid. It has now plummeted. What happened?
-
Shares in luxury goods companies take a hit – will they recover?Luxury goods companies have run into trouble, and the odds of a rapid recovery have receded. What next?
