The Anglo African Oil & Gas (LON:AAOG) Share Price Is Down 98% So Some Shareholders Are Very Salty

The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it's not unreasonable to try to avoid truly shocking capital losses. So spare a thought for the long term shareholders of Anglo African Oil & Gas plc (LON:AAOG); the share price is down a whopping 98% in the last twelve months. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. Anglo African Oil & Gas hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Furthermore, it's down 91% in about a quarter. That's not much fun for holders.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

Check out our latest analysis for Anglo African Oil & Gas

We don't think Anglo African Oil & Gas's revenue of UK£200,649 is enough to establish significant demand. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that Anglo African Oil & Gas finds fossil fuels with an exploration program, before it runs out of money.

We think companies that have neither significant revenues nor profits are pretty high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Anglo African Oil & Gas investors have already had a taste of the bitterness stocks like this can leave in the mouth.

Anglo African Oil & Gas had liabilities exceeding cash by UK£7.3m when it last reported in June 2019, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -98% in the last year , it looks like some investors think it's time to abandon ship, so to speak. You can click on the image below to see (in greater detail) how Anglo African Oil & Gas's cash levels have changed over time. The image below shows how Anglo African Oil & Gas's balance sheet has changed over time; if you want to see the precise values, simply click on the image.

Of course, the truth is that it is hard to value companies without much revenue or profit. Would it bother you if insiders were selling the stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It only takes a moment for you to check whether we have identified any insider sales recently.

A Different Perspective

Given that the market gained 12% in the last year, Anglo African Oil & Gas shareholders might be miffed that they lost 98%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 91% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 7 warning signs we've spotted with Anglo African Oil & Gas (including 5 which is don't sit too well with us) .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.

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