The Scottish Mail on Sunday

Delisting caps bitter period for cocoa bean company

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UNITED Cacao has been a disastrous investment. Recommende­d by Midas in December 2014 at 159p, shares in the Peru-based cocoa business were delisted from AIM last week at 50p.

All AIM companies need to have a nominated adviser, United’s resigned in early January and the group was unable to find a replacemen­t within the one-month time limit.

The delisting caps a tumultuous few months for this business. In June, when the company released its 2015 results, Dennis Melka, then executive chairman and chief executive, was full of optimism, expecting to start production this summer and grow rapidly thereafter.

Melka, right, who founded the business, stepped down from the board in September and took up the position of managing director instead, after a disagreeme­nt with leading shareholde­rs. Three new directors were appointed to make the board more independen­t. All of them spoke gushingly about United’s prospects. However, in December, the company admitted it was exploring a range of funding options, an announceme­nt that sent the share price tumbling on the day by almost half to 62½p. The news went from bad to worse. Melka was ousted by the board, emergency bonds were issued to pay employees and field workers were reduced from 450 to 250 to save cash.

It also transpired that Melka had lent money to United without notifying the board or the stock market.

New chairman Constantin­e Gonticas is urgently seeking cash to keep the business going. He is also talking with brokers and alternativ­e trading platforms to find a way for investors to sell their shares.

More news could emerge on this within the next few days.

Midas verdict: United Cacao seemed like an excellent investment. Global demand for cocoa is rising, the supply is shrinking and United was building an estate in Peru, where the climate is ideal for cocoa production.

But the company has been badly managed, finances were allowed to dwindle to a parlous level and Gonticas is now fighting to keep the business afloat. If he finds the necessary cash, it will come at a heavy price – and current shareholde­rs will bear the brunt.

Sadly, therefore, if Gonticas finds a suitable share trading facility, investors should sell – if buyers can be found.

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