Alcorn Gold (APM) stock surges 300% in 2 weeks

James Ryan Jonas

How much did you earn from Alcorn Gold Resources (APM)?

In the past two weeks, this has been the common conversation topic among jockeys, tsupiteros, and speculative stock traders. True enough, if you were able to join the speculation bandwagon, your APM stock would have already given you huge profits.

During last Friday’s trading, APM closed at P0.075 — a 317% price increase in the past two weeks alone.

APM is a holding firm engaged in the exploration, development and production of oil and gas, and metallic and non-metallic reserves. Its primary stockholder is Lucio Co, also the owner of PureGold chain of supermarkets which recently had its initial public offering.

Below is a chart showing the price and trading volume of APM in recent weeks. Prior to October 2012, the Alcorn Gold Resources stock was not within the radars of stock investors, not even the speculative traders. But when October kicked in, that’s also when the price surge kicked off. Volume activity somewhat started on October 1 which ultimately led to a price rally.

Alcorn Gold Resources (APM) Price and Volume Chart

Even if you did not hold the stock for a full two weeks, you would have earned double-digit returns in just a matter of days. In fact, APM hit the price ceiling twice in the past week.

Price ceiling is a mechanism in the Philippine Stock Exchange that prevents a security from rising more than 50% in any given day.

In the case of APM, it hit its first price ceiling on October 5 when the stock rose to P0.046 — a 48% one-day increase — and its second price ceiling during the next trading day when it rose 50% to close at P0.069. In those two days alone, you would have already doubled your money.

APM Daily Closing Prices and % Returns, October 1-12, 2012


So what accounts for the sudden price increase?

That’s where it gets interesting. According to an official statement of the company sent to the PSE, APM has “no knowledge of any reason that could have triggered the unusual price movement.”

But, of course, several rumors abound, fueling further the stock price rally.

One rumor is that APM will be turned into a holding company that will manage all of Lucio Co’s businesses. Traders allegedly bought APM stocks because they were expecting a price surge that also happened to two companies that became recently became holding firms — one is Enrique Razon Jr.’s Bloomberry Resorts Corp (from Active Alliance Inc.) and the other, Lucio Tan’s LT Group Inc. (from Tanduay Holdings).

Another rumor is that owner Lucio Co is supposedly using APM to expand his businesses. The company is said to be in talks to infuse a beverage business or another oil business into Alcorn. The Co family, however, has denied such speculations.

Today, October 15, the company submitted a disclosure to the PSE saying that they have appointed Evercore Partners as financial advisers that will “study and explore capital market and corporate structure options for [Alcorn].” Evercore Partners was also a financial adviser to the company for the PureGold IPO.

Exploring “capital market and corporate structure options” could mean a lot of things. Perhaps APM simply wants to issue more shares to the public or new debt instruments that can help it raise additional funds. Perhaps it is indeed contemplating to do a backdoor listing for one of its companies. Or perhaps APM wants Evercore’s financial advice regarding the possibility of turning the company into a holding firm that will consolidate all of Lucio Co’s businesses.

Whatever the real story is, expect another round of speculation — and more price fluctuations — for APM in the coming days.

The Securities and Exchange Commission (SEC), on the other hand, said last week that APM is one of several companies currently being investigated for allegations of insider trading and price manipulation.

No one, however, has ever been convicted of illegal trading activities in the Philippines although cases have been filed against individuals and companies in the past.

James Ryan Jonas teaches business management, investments, and entrepreneurship at the University of the Philippines (UP). He is also the Executive Director of UP Provident Fund Inc., managing and investing P3.2 Billion ($56.4 Million) worth of retirement funds on behalf of thousands of UP employees.