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Rightster..still a wrongster: things will only get worse

By Tom Winnifrith, The Sheriff of AIM | Monday 25 May 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 have warned repeatedly that AIM casino listed Rightster (RSTR) is a wrongster yet somehow the company has persuaded institutional investors to stump up another £5 million at 18p. Good money after bad is what I call it. Those dumb enough to throw cash at this POS should perhaps reflect on a few matters.

The company has now published its dismal results for 2014 and as I predicted it missed forecasts by a country mile. Revenue came in at £8.7 million versus a forecast of £11 million. That is a 20%+ miss - in the real world Wrongster would have issued a profits warning but I guess if your nomad is the hapless Cenkos that is deemed not to be needed.

Now bearing in mind the guidance provided by management and accepting that is fair, whatever history suggests, where will we be at December 2015? Management forecasts revenue growth of 100% and a 50% gross margin. That tells me that this POS will send another £8-9 million to money heaven in calendar 2015 so even with the new £4.7 million after costs - with cash at £8.5 million at the year end - 2015 accounts will not get signed off as a going concern without ANOTHER fund raise. Indeed without another fund raise tits up time is c June 2016, just over a year away.

Incidentally in Q1 sales growth was less than 20% but I am being charitable and believing that FY targets will be hit. I am just that sort of nice guy. If I am being too charitable then tits up time could be as soon as Q1 2016.

Meanwhile Rightster is seeking permission to heavily indebt the company (seeking to change its Articles to allow them to raise material debt without the need of a Special Resolution). This may be because the board - minus founder Charlie Muirhead who seems to have buggered off completely now - realises that current shareholders are tapped out and yet the Board knows it needs more capital.

And as a bonus, Rightster continues to value the defcon earnout for Base79 at "approximately £22-24 million". Based on rough maths, the current shareholders will get diluted by 35-40% in aggregate on issue of the shares this summer to the former Base79 shareholders.

Frankly mega dilution this summer is the least of Wrongster's problems. This remains a bargepole stock

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