By Nigel Somerville, The Deputy Sheriff of AIM | Wednesday 7 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.
Last Friday and Saturday I highlighted a series of, ahem, ‘inconsistencies’ in two RNSs issued by the company on 15 and 17 Sept 2014. It has taken until today, Weds, for Tern (TERN) to address this. But Angus Forrest and his crony capitalists are still just telling abject lies.
Let’s just take a look, line by line, at today’s helping of canine cornflakes:
the Company re-confirms that….. there are currently no other developments ….that it wishes or needs to bring to the attention of the market at this stage.
Er, yes there are - that is why there is a whole load more text in this RNS which confirms that what I have been saying since Friday is ALL CORRECT!! If there was nothing that the company needed to say (for example, to correct a load of tosh that had been issued by RNS which contravened AIM Rules) then this RNS would not have been issued at all.
So this opening statement is just rubbish. WH Ireland: as Nomad you have allowed that statement. It is untrue and therefore a contravention of AIM Rules. And just for fun, let’s just refer readers to my spoof RNS of Sunday HERE:‘as a result of unwarranted and baseless allegations which are without substance, the Company is now forced to issue a number of corrections’. Er….
The Company also wishes to provide the following background information:
For that, read “The Company is now going to correct some of the porkies it previously told, because we’ve been found out. We’ve tried really hard to make out that we’ve done nothing wrong, but even our PR spinners at Redleaf Polhill couldn’t get us out of this mess so we’ll try to dress the series of corrections coming up (which are still wrong) as non-essential reading.”
On 15 September 2014, the Company announced the acquisition of a 95 per cent interest in Cryptosoft Limited….
No it did not. WH Ireland you have again failed in your duty as Nomad by allowing that statement, which is untrue and therefore a contravention of AIM Rules. What Tern had actually announced was:
Tern will own 95 per cent. of the issued ORDINARY SHARE CAPITAL of Cryptosoft….
That, of course was wrong. Not only had Tern not taken 95% of the ordinary share capital (it had bought 100% of the ordinary share capital, but got that bit wrong), it had failed to point out that there was a second class of share, B-shares, which ranked equally for dividends and distributions, which reduced the ordinaries to an 86% interest on those points. Note also this morning’s use of the word ‘interest’. But that is not what Tern told the market on 15 Sept 2014. Continuing…
…on terms which included an entitlement to the seller …. and other employees to 25 per cent of the net proceeds of sale as and when Cryptosoft is sold.
Ah yes, that’s the bit they got right. I think it might be the only bit of the original RNS which was correct (apart from whether Tern then got all of, or just 95% of the remaining 75% because the original RNS was wrong on the point of ‘Ordinary Shares’ which will become clear ).
This structure necessitated the creation of a new class of "B" ordinary shares in Cryptosoft. The Company acquired all the 950 "A" ordinary shares of Cryptosoft in issue. The 150 "B" ordinary shares in issue, which carry no voting rights, were issued and allotted to the Seller and the other employees. The Company therefore owns 100 per cent of the voting rights of Cryptosoft and approximately 86 per cent of the aggregate "A" and "B" ordinary share capital of Cryptosoft until a sale, in which event the Company's interest would reduce to 75 per cent of the net proceeds of sale…
Oh dear, oh dear. This is just not true at all. You can read the filing of Cryptosoft’s latest share capital to Companies House HERE. As I pointed out on Saturday, here is how the two classes of A- and B- shares are described in that document:
A Shares of £1 each: there are 950 in issue. Prescribed particulars:
a) carry one vote each,
b) rank equally for dividends
c) rank equally on distributions (including on a winding up) and
d) are non-redeemable
B Shares of 33 1/3 pence: there are 150 in issue. Prescribed particulars:
The holders of the B Shares are entitled to 25 per cent of the proceeds of sale of the Company on a sale.
a) carry no voting rights,
b) rank equally for dividends,
c) rank equally on distributions (including on a winding up)
d) are non-redeemable.
So where does it describe the B-shares as being ‘Ordinary’ shares, then? It does not.
Let’s just take a look at the definition of an Ordinary Share on the Companies House website (HERE ):
Ordinary: These are the ordinary shares of the company with no special rights or restrictions. The company may divide them into classes of different values;
No restrictions? What, like voting rights? I would suggest that these B-shares cannot be ‘Ordinary ‘ shares under these circumstances, and are surely some kind of preference share, given the preferential rights over the proceeds of any sale of Cryptosoft.
What kind of sophistry is this, then? Why is Angus Forrest trying to pass off the B-shares as Ordinary shares when they are plainly not? Is it simply because he cannot bring himself to admit that the original RNS of 15 Sept 2014 which claimed that Tern had bought 95% of the Ordinary Share Capital of Cryptosoft was a lie? Is he trying to cover that up with more untruths? I would suggest that this is a clear breach of AIM Rules and as such WH Ireland should hang their sorry corporate heads in shame for having signed that off in their position as Nomad. WH Ireland has breached its own responsibilities, therefore, with regard to AIM Rules for Nomads.
And then there is the small matter that Tern has filed a return to Companies House detailing shares issued in the transaction. In that document, it is stated that Tern has acquired the entire issued share capital of Cryptosoft. Has that been corrected yet? Go on Mr Forrest, answer that one!
…For the avoidance of doubt, Jon Penney and Al Sisto are the only directors of Cryptosoft and Al Sisto is the Chairman.
That is breathtaking: nobody has questioned this. I have questioned every other detail, but not this one. So how about this statement instead: “For the avoidance of doubt, Mr Angus Forrest in his role as Chairman of Tern and WH Ireland as Nomad were responsible for a catastrophically incorrect RNS and every single point picked up by our good friend the Deputy Sheriff has turned out to have correctly demonstrated that the RNS of 15 Sept 2014 was badly flawed and misleading, and we are still not telling the truth now.”
Today’s RNS continues, then, with a vain attempt to justify the RNS of 17 Sept 2014. That, you will remember, gave two different sets of numbers for shares issued as the result of a Placing and conversion of loan stock. The first two parts of this are fine, and were fine at the time, namely:
-- On 17 September 2014, the Company announced that:
-- it had raised GBP85,000 by the issue of 6,800,000 new ordinary shares at a price of 1.25p per share. The Company also announced it had raised GBP200,00 convertible loan stock with a conversion price of 1.25p per share.
-- Al Sisto, executive director, had converted GBP30,000 of a GBP100,000 loan to the Company into 2,400,000 new ordinary shares at a price of 1.25p per share
It is here that the problems lie:
-- Michael Clark, executive director, and Angus Forrest, Chairman, had each converted GBP9,012.80 of existing convertible loan notes into 447,063 new ordinary shares. (These loan notes were issued on 16 August 2013 at a General Meeting which approved a capital reorganisation and issue of convertible loan notes. Following the 1 for 1000 share capital consolidation and 50 for 1 subdivision approved by shareholders on 1 November 2013, the conversion price became 2.016p per share. )
The original RNS stated the above details, but also in the very same RNS had stated that:
certain existing Company Directors have agreed to the partial conversion of GBP48,000 of existing convertible loan stock into new ordinary shares in the Company, at a conversion price of 1.25 pence per share (GBP30,000) and 2.016 pence per share (GBP18,000).
As I have previously pointed out, these two sets of numbers conflict. £18,000 of debt converts into 892,857 shares at 2.016p per share. In other words, Mr Clark and Mr Forrest had converted £9,000 each into 446,428 shares each. Clearly one of those figures is wrong, so – being charitable – we might say that somebody got their maths wrong in the 17 Sept 2014 RNS and today’s RNS has tried to clear that up. But it is highly disingenuous to make out that, by omission, the original RNS was correct. It was not, it contained several errors.
So now Tern is telling us that the conversion shares issued to Mr Clark and Mr Forrest as detailed above were, indeed, issued at 2.016p per share. Except that in the original RNS of 17 Sept 2014 was a summary of the share issue:
As a result of the above placing and conversion, Tern has issued a total of 10,094,127 new ordinary shares of 0.02 pence per shares at a price of 1.25 pence per share. Application has been made for the new ordinary shares to be admitted to trading which is expected to occur on 22 September 2014.
So all the above shares had been issued at 1.25p, then? Even the ones issued at 2.016p? And lest we forget, the filing to Companies House also stated that all those shares were issued at 1.25p per share. Has that been corrected yet, Mr Forrest? At time of writing, it has not been.
Tern has had a weekend and two full trading days to cobble this nonsense together. And it still is wrong, misleading and the most appalling insult to Tern’s shareholders. Why has it taken so long to issue? Because no amount of spinning by Tern’s PR firm Redleaf Polhill could hide the fact that the market had been given a litany of incorrect information by Tern, signed off by Chairman Angus Forrest and (supposedly) checked and verified by Nomad WH Ireland – who, judging by the nonsense they have allowed through in today’s RNS are still deep in a state of hibernation.
Finally, one presumes with regard to the utter disgrace of events leading up to the share issue of Christmas Eve in the wake of a massive share price spike caused by a widespread misconception of an erroneous report, we are told:
The Company also highlights that it cannot comment on external, independent, commentary, valuations or assessments of the Company or its investments.
Oh no? Then what about this, from Tern’s RNS of 19 April 2014:
Leading market research company 451 commented:
"This is a good deal for Flexiant. It gives it the potential to reach a far wider audience than it could have on its own,.... It's a nice tuck-in partnership for Parallels, which now can forgo cooking up all of the features around service-provider business use that Flexiant brings. It already counts some 10,000 service providers using Parallels to deliver cloud services, and will be targeting vCloud swap-outs with its Flexiant capability.
Parallels is a global leader in hosting and cloud services enablement and cross-platform solutions. http://www.parallels.com/uk/about/about-parallels/"
And this, from the same RNS:
For the second year in a row, Flexiant has achieved the highest product innovation score among ten vendors evaluated by Info-Tech Research Group's Vendor Landscape: Cloud Management Platforms and was awarded the Value Award.
Info-Tech evaluated ten competitors in the cloud management market including Abiquo, CA Technologies, Citrix, Eucalyptus, Flexiant, InContinuum, Microsoft, OpenStack, Virtustream and VMware. Each vendor was assessed on features, usability, affordability, architecture, viability, strategy, reach and channel.
Flexiant maintained the highest Info-Tech Value Score(TM) of the vendor group scoring 100, well above the average score of 36. Vendors were indexed against Flexiant's performance to provide a complete, relative view of their product offerings. Flexiant was rated exemplary as a product in usability, affordability and architecture.
Oh, the irony: it was a misunderstanding of a misreporting of 451’s report of the Cryptosoft transaction (uncorrected by Tern) which led to the share price spike which allowed Tern to get its Placing away at 9p on Christmas Eve.
And just while we are on that, let’s just take another look at Tern’s RNS of 22 Dec 2014, in response to the share price spike:
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.
Now then, normally one would read the words “the Company knows of no reason for such movement in its share price” or some such. But that statement does not say that, does it? So is one to conclude that the company knew full well the reason for the rise in the share price at that time?
And they went on to complete a Placing at 9p. If I had been put in on that placing, I would want my money back.
This has to be one of the most disgraceful RNS releases ever on the AIM Cesspit. I think it fully demonstrates that Angus Forrest is not a fit and proper person to be on the board of any company, let alone one listed on AIM. Nomad WH Ireland has failed miserably to perform its regulatory function and serious questions need to be asked about that.
While Mr Forrest has ANYTHING to do with Tern plc, in my view it is totally uninvestable. In the light of all this, and the revelations from the last few days, Tern’s shareholders must surely be asking themselves what other skeletons are in the closet. Where are the rest of the bodies buried?
To save anyone else from this monstrosity of a plc, Tern’s shares should be immediately suspended from trading until this whole sorry mess is cleared up once and for all. If AIM Regulation won’t do it, then if there is the slightest ounce of common decency within the walls of the offices of WH Ireland, they would resign as Nomad with immediate effect so as to trigger an automatic suspension.
But one thing is clear: Angus Forrest has to go, and never been seen again on the AIM Casino. Go on, get your coat. Leave by the back door.
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