By Nigel Somerville, The Deputy Sheriff of AIM | Monday 5 January 2015
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.
I am horrified! Take careful note, anyone invested in Angus Forrest’s Tern plc (TERN) You see, reading through the bulletin boards for Tern on ADVFN and elsewhere, much ado has been made of an apparent valuation by an American outfit called Signal Hill, which published its “Q3 2014 Security & Risk Market Snapshot” pre Christmas. In that document, Cryptosoft was described as having an Enterprise Value of $75 million. Did that make Tern the most massively undervalued stock in history? No!!
You see, I was struck by the too-good-to-be-true investment story of Tern, whose market cap sits as I write at around £3 million or so, which apparently owned a business worth $75 million. That is one hell of a multi-bagger, then. Except that it is not. Posters on the ADVFN bulletin boards have been making out that Signal Hill thought Cryptosoft was worth $75 million. But what Signal Hill reported was that the takeover deal by Tern put an enterprise value of $75 million on Cryptosoft. This is clearly nonsense.
Tern’s RNS for the deal told readers that Cryptosoft's assets were just £28,000 of capitalised software. Er…that’s it. And for that, in an all-paper deal which handed out about £40,000 worth of Tern confetti, Angus Forrest’s outfit were to get 95% of the company, and would invest £300,000 into it.
Does that not mean that the pro-forma Enterprise Value of Cryptosoft is about £15,000 plus the approx £40,000 of Tern’s paper. Total: £55,000. $75 million?! Try $75k.
Now just to be sure, I contacted Signal Hill to find out where that $75 million EV figure came from. Had it performed some kind of alchemy to come to this hugely inflated price tag? Was it even involved in the deal, as has been suggested? Er, no.
I have been told by Signal Hill that “We issue a quarterly M&A round up and list select publicly announced transactions, however this is not one that we did -- we are just reporting it based on public information”.
You can read that public information here. So a simple clerical error, then. It is $75,000.
A correction from Signal Hill will follow.
But what about this RNS from Tern plc, issued on 22 Dec 2014:
("the Company" or "Tern")
Share Price Movement
Tern Plc, the investment company specialising in the cloud and mobile technology sectors, has noted the recent increase in its share price.
The Company can confirm that, other than matters which have been announced, there are currently no other developments it wishes or needs to bring to the attention of the market at this time.
And then just two days later, on Christmas Eve came this:
Tern Plc (AIM:TERN), the investment company specialising in the cloud and mobile sectors, is pleased to announce it has raised GBP294,500 before expenses through a placing of 3,272,222 million new ordinary shares of 0.02p each ("Ordinary Shares") at a price of 9p per Ordinary
Share ("the Placing")….
So what do we make of all that, then? Surely whichever of Tern’s Brokers (Peterhouse and WH Ireland) got this placing away would have had to do some kind of due diligence? Maybe speak to a market maker, check the bulletin boards? Why on earth had the company put out a ‘know of no reason’ and yet the shares were still heading to the moon? Anything to do with the ramp-athon going on at moron central, based on a spurious $75 million valuation being bandied about?
Surely the Nomad, WH Ireland, would have done some kind of verification and checking that there was nothing the company needed to bring to the attention of the market? Surely one check to perform would have been to check the bulletin boards?
You see, the bulletin boards were making a merry song and dance about what some people thought was a valuation of $75 million having been put on Cryptosoft by Signal Hill, a respected US outfit. This was totally untrue: even with a clerical error, this was just Signal Hill reporting a transaction. It was NOT Signal Hill claiming in any way that it thought Cryptosoft was worth $75 million.
And then there is the role of Tern’s Board of Directors in all of this. They, with the aid of their corporate advisors, got a placing away on the back of totally spurious mis-information in the market. Was the 22 Dec 2014 just utter lies, or was it negligence?
How can any single one Tern’s board remain in post after this?
Even by AIM-Cesspit standards, this is monstrous.
How do you think investors who were merrily buying up Tern’s stock in the mistaken belief that Signal Hill had valued Cryptosoft at $75 million will be feeling now? Duped? Ripped off?
And what about the investors who were put in on the Christmas Eve placing at 9p? What were they told to get them so eager to part with their cash? Who by? When? How much have they lost so far?
Who might they direct their ire at? ShareProphets? Doubt it. Angus Forrest and his board? Oh yes. Peterhouse, WH Ireland? Certainly.
It is interesting to note that in the wake of the articles over the last few days which have wiped a big % off Tern’s share price, which pointed out a number of – cough – inconsistencies, none of the issues raised have been addressed by any of today’s (thus far) four RNSs.
Time for some comment, Mr Forrest and your Nomad WH Ireland. This is scandalous.
Coke and hookers for Christmas Dinner? Nice one!
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