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By Tom Winnifrith, The Sheriff of AIM | Thursday 21 April 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.
You were probably wondering what deal Avanti Communications (AVN) was going to do this year to increase its sales after last year's creation of revenue when it was the only person paying money - the deal the FRC is looking at HERE. And you were also wondering how it was going to raise some cash. Natch it would not be by actually selling oodles more capacity on its satellites would it?
If so, you should look at the briefly announced sale of two not yet built assets to another company. This is a deal in bongo bongo land which screams "red flag"
On 12th April, a company called Schauenberg briefly posted a press release that it had bought 2 Ka Band gateways from Avanti. The press release was very quickly taken down - infact, there's no cached version of the release but you can still see the headline if you type into Google "Schauenberg Ka Band".
The text says:
"Singleview - Schauenburg - Schauenburg Gruppe
Press release, 12 April 2016 ... The contract will entail Stratosat West Africa buying the two Ka-Band Gateways from Avanti and renting the antennas back to ..."
Schauenburg is a large but privately owned German group which has interests in many sectors and operates in South Africa where it is a significant player in satellite technology. It has a West Africa subsidiary.
It appears that Schauenburg published a press release but by inference it didn't tell Avanti it was doing so. When Avanti became aware of this it was pulled but not before it was on the internet where nothing really disappears.
Avanti's two Gateways in Africa are in South Africa and Nigeria. They aren't built yet. So Avanti seems to have cashed-in assets that haven't been built yet in return for paying a rent to use them in future.
This looks like a double whammy upside: Revenue from the sale and cash from Schauenberg. Who cares about the massive "rent" (i.e. interest) that Avanti will have to pay in future - that's just accounting for an operating lease.
I still don't understand how this doesn't break the terms of the Bond indenture? Avanti is taking the bond holders money to build an asset but selling it instead for near term cash vs future rent.
I shall leave that to bombastic CEO David Williams to discuss with his bondholders. Meanwhile Lucian, Matt Earl, myself and Evil will be devoting almost half of our UK Investor Show session to looking at Avanti's dodgy accounts and even more questionable business practices going back to its early days. We will explain why the cash will run out and why the shares will go to 0p.
It will be no holds barred stuff and if Avanti wishes to get front row tickets for its lawyers it can just drop me an email to arrange. I am aware that Avanti is happy to make legal threats to its critics but we are ready for that and wont back down. This is a zero.
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