This Company Is Effectively Worth Nothing

Disclosure: I currently hold a short position in this company. The reader should be aware of that bias in what follows.

Briefing

Thesis: Ferrexpo desperately needs approximately $100 million and is pursuing an equity raise as the most viable solution. The deadline is 30 April 2026 — if they cannot complete the fundraise, shares will be suspended from listing and trading. Cash on hand is sufficient only to the end of August 2026.
Key problem: The Ukrainian tax authorities have suspended VAT refunds to the group since March 2025 because of the company's association with majority shareholder Kostyantin Zhevago. Net VAT receivable as at 31 March 2026 was approximately $90.3 million — money the company is owed but cannot access.
Operational reality: Operating just 1 of 4 pellet lines — approximately 25% of pre-war capacity. Production was temporarily suspended towards the end of FY 2025. Employee hours have been cut, non-essential capital expenditure suspended, and all discretionary spending halted.
My view: I think this company is going to fold imminently, possibly at the end of the month. Even if the equity raise succeeds, it buys approximately 18 months of breathing room while none of the fundamental problems are resolved.
Overall stance: Short position maintained. No action to change.

Business Model

Ferrexpo is an iron ore pellet producer with mining operations near Kremenchuk in central Ukraine. The company is vertically integrated — it mines iron ore, processes it into pellets, and sells the finished product to steel mills, primarily in Europe (Austria, Slovakia, Czech Republic, Germany). It also operates a fleet of vessels on the Rhine and Danube waterways and holds an interest in a port in Odessa.

The company was historically a significant global producer, but the Russian invasion of Ukraine and subsequent operational disruptions have reduced output to approximately 25% of pre-war capacity. The majority shareholder is Kostyantin Zhevago, through his vehicle Fevamotinico S.à r.l., holding 49.32% of ordinary shares.

Liquidity Timeline

The cash position has been deteriorating rapidly:

Cash runway

Date	Cash Position	Key Event
31 December 2025	$47m	Year-end
27 February 2026	$30m	—
31 March 2026	$22m (net accessible)	1 April RNS — cash sufficient to end of June
17 April 2026	$20m (net cash)	Today's update — cash sufficient to end of August
30 April 2026	—	Deadline: FY 2025 accounts / fundraise or suspension

The sale of the transhipping vessel Iron Destiny for $7.7 million has provided a modest liquidity extension. Absent the intended fundraise, cash on hand is sufficient to get them to the end of August 2026 — subject to volatility in iron ore pricing, operating expenses including energy costs, and no material changes in conditions.

Ferrexpo — accessible cash ($m, 2025–2026)

Source: Ferrexpo RNS filings, AJ Bell. The trajectory shows the company running out of cash by late 2026 absent a fundraise.

What's Driving the Crisis — VAT Refund Withholding

The Ukrainian tax authorities suspended VAT refunds to the group from March 2025, arising from the group's association with its majority shareholder, Kostyantin Zhevago (the "Mister Zhevago" issue). This withholding has continued into 2026 and to date. As of 31 March 2026, the group's net VAT receivable balance in Ukraine was approximately $90.3 million.

This has had a severe impact on the group's liquidity and forced a further downscaling in production, lower procurement, and reduced output. The Ukrainian government is effectively targeting the company because of its association with Zhevago.

VAT and shareholder context

Metric	Figure
Net VAT receivable (31 March 2026)	$90.3m
Majority shareholder	Fevamotinico S.à r.l.
Beneficial owner	Kostyantin Zhevago
Shareholding	49.32% of ordinary shares
Relationship agreement threshold	24.9% (agreement terminates if below)
Impact of fundraise on threshold	Not expected to breach 24.9%

🎓 Clarity What is a VAT refund and why does it matter here? When a company exports goods, it typically pays value added tax on its inputs (materials, energy, services) but charges no VAT on its exports. The government owes the company a refund for the difference. For Ferrexpo, this refund is approximately $90 million — money they are legally owed but which the Ukrainian authorities are withholding because of the company's association with Zhevago. Without this cash, the company cannot fund its operations, even though it is technically profitable on an operating basis.

Operational Position

Production was temporarily suspended towards the end of FY 2025 to preserve cash. Into 2026, production has resumed but is limited to approximately one quarter of the group's sustained pre-war capacity — they are operating just one of four pellet lines. Products are sold to European customers.

Operating status

Metric	Figure
Pellet lines operating	1 of 4
Capacity versus pre-war	c.25%
Cost measures	Reduced hours, suspended capital expenditure, procurement cuts

The $100 Million Equity Raise

Shareholders will not be keen on participating in a $100 million equity raise — that's roughly 40% of the current market capitalisation at current prices, and would be hugely dilutive. And to be truly honest, what does it buy them? It buys approximately 18 months of breathing room for the company to get things in order, but none of the fundamental factors are actually improved:

The Ukrainian government is going to continue withholding VAT refunds from the company consistently and on an ongoing basis
The Ukrainian war is not about to end
Energy costs are expected to be higher than previously anticipated in the coming months
The company is operating at just 25% of pre-war capacity with no clear path to normalisation

It's quite bullish to try and buy shares in an equity raise under these conditions. I don't think they'll be able to achieve it. I could be wrong — perhaps there is enough willing capital out there — but I think this company is going to fold imminently, possibly at the end of the month if the fundraise doesn't complete by the 30 April deadline.

The Fevamotinico relationship agreement remains in place (the fundraise is not expected to dilute them below 24.9%), meaning the Zhevago issue persists regardless. Discussions with the largest shareholder about supporting the fundraise remain "ongoing," which is not exactly a ringing endorsement.

Share Price Context

Ferrexpo (FXPO) — share price (last 12 months)

Source: London Stock Exchange data. 52-week range: 33.10p–87.10p. Current price c.38p. The steady decline reflects the deteriorating cash position, going concern risk, and operational constraints.

Conclusion — Short Position Maintained

I think this company is effectively worth nothing.

Even if the equity raise succeeds, it buys approximately 18 months of breathing room while none of the fundamental problems — the VAT withholding, the war, the energy costs, the 25% capacity utilisation — are resolved. The Zhevago association persists regardless of the fundraise outcome.

If the fundraise fails by 30 April, shares will be suspended from listing and trading.

Short position maintained. No action to change.

Disclaimer: This article is for information and education only and is not financial advice. I am not a financial adviser. The author holds a short position in this company. Investing involves risk, including loss of capital. Do your own research and consider seeking independent advice.