Disclosure: The author has a short position in one or more of the shares mentioned. 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.
BNN Technology (BNN) has duly announced its prelims for the year to Dec 2016. First of all: hats off to broker Mirabaud for finding punters willing to throw a further £25 million at the company on top of £51 million stumped up last year.
The company may have changed its FTSE classification benchmark from “gambling” to “internet” but it remains very much in the former category for investors. (As I write the placing is already underwater).
Through no fault of its own, BNN has had to abandon the online lottery business after a temporary ban two years ago has become somewhat permanent. The solution has been to throw heroic amounts of cash at various rather vague mobile-related projects (payment services, student services, motorist services etc).
It is of note that in both last week’s trading statement and the prelims that the year end cash balance of £28 million is given and we are left to guess at how much has been spent since. Given the need for a placing, and cashburn in the last five months of 2016 of over £20 million, it is reasonable to assume that most has disappeared. Where it all goes is unclear.
The company makes much of an impending NASDAQ listing where it sees “a deeper pool of capital” and a “greater understanding of our business”. Apart from being rather insulting to its UK investors (the implication being that they are dumber and less deep-pocketed than our friends across the water), a NASDAQ listing could well prove to be a double edged sword.
It involves onerous quarterly reporting and supervision by the SEC, who are ultra sensitive to US-listed China plays after a string of high profile frauds in that space unearthed over the last few years. They are in a completely different league to the dozy jobsworths at AIM Regulation.
BNN states it is "hopeful" of an operating profit in H2, but the prospective market cap of £190 million (post placing) doesn’t even begin to address the risks involved here.
The opaque and complex business plan reminds me somewhat of Tungsten Corporation (TUNG): strip out the impressive sounding jargon and there is nothing there beside a cash guzzling purveyor of jam tomorrow.
I have added to my short.
This article first appeared on the Nifty Fifty website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tips from Tom & Steve and more from Lucian next week click HERE
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