By Cynical Bear | Friday 16 December 2016
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Yesterday’s staggering RNS from CloudTag (CTAG) has already been covered brilliantly in the CloudTag Bearcast special with Tom Winnifrith at his acerbic best – an absolute must-listen - but I have a couple of other observations and am unable to leave the L1 conversion notice date lie alone just yet!
The RNS is astounding in many ways . I have this image of the guys at Cairn wondering into Amit Ben-Haim’s office last Friday with a stack of ShareProphets’ articles under their arms with Liam Murray saying: “Right, we’re going through these one by one and not leaving here until all the skeletons are out of the closet. Ok, where, shall we start? Who is Massimo Ventimiglia? Oh dear, um, ok, next - what about this Second Chance offer?”
And so on.
I assume they probably only came up for air just before the RNS yesterday as it must have taken days to unpick everything. I'm guessing that Cairn insisted that there can be no more lies, otherwise it would resign as Nomad; accordingly, unlike Tom, I don’t think there are any lies in this latest RNS, however, I do think it is outrageously misleading, full of weasel wording and lacks transparency.
In particular, I wanted to look again at the L1 conversion notice date point as, on the face of it, it looks like a bare-faced lie but I’m not so sure. Yesterday’s RNS stated that:
“The Company announced on 9 December 2016 that L1 Capital Global Opportunities Master Fund ("L1") had provided notice to convert £1,150,000 of Tranche 1 Notes (nominal value) into 19,166,666 new ordinary shares ("Notice") ("Conversion"). The Company clarifies that the Notice relating to the Conversion was dated 6 December 2016 however it was not received by the Company until 7 December 2016.”
Now clearly, it is patent nonsense that there was a 24 hour gap between L1 issuing the notice and CloudTag receiving the notice, but I’m not sure that it what this RNS actually says.
This is what I believed happened.
I think it is safe to assume that it is a valid notice of conversion and dated correctly as L1 wouldn’t have made such a drastic error and, if it was incorrect, it would have been picked up by this investigative process. Accordingly, I assume that at close of play on Tuesday 6 December, L1 sent the notice to CloudTag. In contrast to Tom, I don’t necessarily believe that the notice had to be issued in trading hours of the 6th, just that it has to be issued on the 6th to be able to utilise the preceding day’s closing bid for the warrant price.
One needs to remember that this L1 fund is based in the US, so late on 6th (US time), L1 prepares its notice, dates it correctly, and sends it to CloudTag.
Now it could be that CloudTag actually receives it on 7th (UK time) due to the time difference or very late on 6th but doesn’t actually read it until 7th. Either way, one could argue that the wording in yesterday’s RNS is accurate.
However, I do not believe for a second that the notice was received after hours on the 7th but this RNS doesn’t actually say that.
My view is that it was received / read early on 7 December and the "speeding ticket" RNS issued on the afternoon of 7 December should have mentioned it and I do still believe that the statement on 9 December that the notice was received after hours on 7 December was a lie.
I trust that the book has been thrown at CloudTag, and potentially Cairn too, for those mistruths / omissions which could easily be construed as market abuse but the appropriate authorities have somehow reached the conclusion that no further public sanction was merited for whatever reason. Cairn has also somehow decided that it can still act as NOMAD, presumably on the basis that the company has now come clean on a number of matters and will behave better going forward.
We'll see but I doubt we will get a podcast anytime soon from Mr Ben-Haim.
Personally, I still think this stinks and that the latest RNS should been more transparent in this regard, BUT I don’t think what is written in black and white in yesterday’s RNS is actually a lie, shockingly misleading yes, but not a lie.
I’m amazed that the share price hasn’t plummeted further today but with L1 now desperate to get out of its remaining obligations and keen to exercise and get rid of warrants too, it will be dumping at an alarming rate and so it’s only a matter of time.
Never miss a story.
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