Drake & Scull board approves the formation of a restructuring committee

Loss-making Dubai contractor Drake & Scull International said on Tuesday its board approved forming a restructuring committee after majority of its shareholders voted to continue operations.

The four-person committee is comprised of company board members including group chief executive Yousef Al Mulla and Gulf Navigation chief executive Khamis Buamim, DSI said in a statement to the Dubai Financial Market, where its shares are traded. The decision to form the committee came during a board meeting on Monday.

The board discussed "proposals submitted by the financial and legal advisers and the board referred them to the restructuring committee for approval," DSI said. A company spokesman said no further details were available on the elements of the restructure plan, or when the committee would start its work.

Cash-strapped DSI, which last year announced a turnaround plan, said it would embark on "further restructuring" after shareholders decided this month to keep the company operating. The Dubai builder, along with its regional peers, has been hit by tough operating conditions as a three-year slump in oil prices meant contractors' payments were delayed.

DSI, which has faced mounting losses since 2015, called a general assembly meeting earlier this month in accordance with an article of UAE companies law. Article 302 of the law requires companies to vote on whether to continue operating once their losses reach half of their share capital.

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Analysts said that after voting to keep the company in business, the biggest priorities facing DSI are assessing the profitability of their projects and fundraising.

Private equity operator Tabarak Investment in September increased its shareholding in the company to 13.73 per cent from 13.26 per cent, despite a drop in the DSI's shares.

The company, which reported a second-quarter loss of Dh181 million compared to a loss of Dh183m a year earlier, has yet to post third-quarter results.

Shares of DSI closed down 1.5 per cent to Dh0.403

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History's medical milestones

1799 - First small pox vaccine administered

1846 - First public demonstration of anaesthesia in surgery

1861 - Louis Pasteur published his germ theory which proved that bacteria caused diseases

1895 - Discovery of x-rays

1923 - Heart valve surgery performed successfully for first time

1928 - Alexander Fleming discovers penicillin

1953 - Structure of DNA discovered

1952 - First organ transplant - a kidney - takes place

1954 - Clinical trials of birth control pill

1979 - MRI, or magnetic resonance imaging, scanned used to diagnose illness and injury.

1998 - The first adult live-donor liver transplant is carried out

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How Tesla’s price correction has hit fund managers

Investing in disruptive technology can be a bumpy ride, as investors in Tesla were reminded on Friday, when its stock dropped 7.5 per cent in early trading to $575.

It recovered slightly but still ended the week 15 per cent lower and is down a third from its all-time high of $883 on January 26. The electric car maker’s market cap fell from $834 billion to about $567bn in that time, a drop of an astonishing $267bn, and a blow for those who bought Tesla stock late.

The collapse also hit fund managers that have gone big on Tesla, notably the UK-based Scottish Mortgage Investment Trust and Cathie Wood’s ARK Innovation ETF.

Tesla is the top holding in both funds, making up a hefty 10 per cent of total assets under management. Both funds have fallen by a quarter in the past month.

Matt Weller, global head of market research at GAIN Capital, recently warned that Tesla founder Elon Musk had “flown a bit too close to the sun”, after getting carried away by investing $1.5bn of the company’s money in Bitcoin.

He also predicted Tesla’s sales could struggle as traditional auto manufacturers ramp up electric car production, destroying its first mover advantage.

AJ Bell’s Russ Mould warns that many investors buy tech stocks when earnings forecasts are rising, almost regardless of valuation. “When it works, it really works. But when it goes wrong, elevated valuations leave little or no downside protection.”

A Tesla correction was probably baked in after last year’s astonishing share price surge, and many investors will see this as an opportunity to load up at a reduced price.

Dramatic swings are to be expected when investing in disruptive technology, as Ms Wood at ARK makes clear.

Every week, she sends subscribers a commentary listing “stocks in our strategies that have appreciated or dropped more than 15 per cent in a day” during the week.

Her latest commentary, issued on Friday, showed seven stocks displaying extreme volatility, led by ExOne, a leader in binder jetting 3D printing technology. It jumped 24 per cent, boosted by news that fellow 3D printing specialist Stratasys had beaten fourth-quarter revenues and earnings expectations, seen as good news for the sector.

By contrast, computational drug and material discovery company Schrödinger fell 27 per cent after quarterly and full-year results showed its core software sales and drug development pipeline slowing.

Despite that setback, Ms Wood remains positive, arguing that its “medicinal chemistry platform offers a powerful and unique view into chemical space”.

In her weekly video view, she remains bullish, stating that: “We are on the right side of change, and disruptive innovation is going to deliver exponential growth trajectories for many of our companies, in fact, most of them.”

Ms Wood remains committed to Tesla as she expects global electric car sales to compound at an average annual rate of 82 per cent for the next five years.

She said these are so “enormous that some people find them unbelievable”, and argues that this scepticism, especially among institutional investors, “festers” and creates a great opportunity for ARK.

Only you can decide whether you are a believer or a festering sceptic. If it’s the former, then buckle up.

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Director: Quentin Tarantino
Stars: Uma Thurman, David Carradine and Michael Madsen
Rating: 4.5/5