18. June 2021 | 09:56 CET
Adler Modemärkte, Steinhoff, Osino Resources: Which penny stocks have substance?
Penny stocks often have something disreputable about them - at least in Germany. As soon as a share is quoted at less than EUR 1 in Germany, it is considered to be at risk of insolvency. The reason for this is that the minimum nominal value of German stock corporations is EUR 1. Abroad, however, things are quite different: In Australia, it is not uncommon for shares to trade even below one cent. For investors who are used to this, it is anything but disreputable. In concrete terms, it all depends on the companies themselves anyway. We profile three companies that are either penny stocks or were, not long ago.
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ISIN: DE000A1H8MU2 , NL0011375019 , CA68828L1004
Adler Modemärkte: Will the restart work?
The shares of Adler Modemärkte have been hyped mightily in recent weeks. There was a reason for this: the Company slid into planned insolvency in the wake of the lockdowns. Most recently, there were good reasons to believe that the fashion chain will continue its business. The Company received an emergency loan of EUR 10 million and resumed delivering goods to its stores. Adler wants to find an investor by mid-June and then start restructuring the Company. That could be crowned with success. Adler Modemärkte has always tended to have older customers. According to optimistic market participants, the boom in online retailing could have less of an impact on the Company after the crisis than with young fashion chains.
On the other hand, an unsuccessful search for an investor could further exacerbate employees' and investors' fears for the future. Most recently, the stock came back significantly and even tested the EUR 1 mark. The share is still nothing more than a hot gamble. However, after the recent price losses, a rise could soon be imminent. How sustainable this will be, however, depends on the restructuring of the Company.
Steinhoff: What will become of the gamblers' darling?
The situation at furniture manufacturer Steinhoff is even more complicated than Adler's. While Steinhoff is not in insolvency proceedings, the stock's success depends on a complex legal process. After Steinhoff was involved in an accounting scandal, shareholders are demanding money from the Company. The legal battle has been going on for years. The stock plunged in the wake of the threat of over-indebtedness following a possible ruling. The hopes of many gamblers rest on a possible settlement between the plaintiffs and Steinhoff.
In recent months, interim results and other water level reports surrounding the pending settlement have repeatedly caused the stock to twitch. Since the Steinhoff share is currently trading at EUR 0.11, investors can quickly gain 10 or 20%. In the same way, however, the price can also crash. Nothing has been happening with the share for weeks. For many private investors, the speculation has probably come to nothing. A new investment does not offer itself meanwhile: Who wants to invest in a legal dispute?
Osino Resources: Promising gold project instead of principle hope
Unlike Adler Modemärkte and Steinhoff, the Canadian Company Osino Resources has no problems - rather the opposite. The Company is looking for gold in Namibia and is active there in the well-known Damara mineral belt. There are already producing gold mines in the neighborhood. One of these mines, B2Gold's Otjikoto mine, was discovered by the team around Osino CEO Heye Daun himself and ultimately sold to the mining giant. So Osino Resources is operating in a known area and has already proven how to explore and develop resource properties until they can either be put into production or sold.
The Osino Resources share was a penny stock in Germany just a few weeks ago. In the meantime, however, that has changed. Osino CEO Daun emphasizes that his Twin Hills project can make rapid progress. The geological parallels between Osino Resources' exploration project and the geology of the Otjikoto mine, already in production, are striking. (Read the Interview with CEO Heye Daun for more on this.) This view is also becoming more widely accepted in the market. Unlike many penny stocks, Osino Resources has a clear strategy, a promising project and convinced investors, such as mining legend Ross Beaty. Osino Resources' opportunities are likely to be significantly greater than those of companies in insolvency proceedings or litigation.