By Tom Winnifrith, The Sheriff of AIM | Saturday 11 June 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.
On 16 May 2016 Avanti Communications (AVN) published a third quarter trading statement in which the company's bombastic, pompous and no longer credible CEO David Williams declared "Avanti is making good progress." Shortly afterwards he proudly boasted that he had bought shares in the company at 91.25p. Today, less than four weeks later the shares have collapsed to just 53.25p to sell. On a daily basis they are being marked lower and lower. What is happening and what must Williams announce on Monday?
Firstly the market noted that Williams earns more than $1 million a year for running Avanti, a company that guzzles cash, has missed every performance target set in its history and which is being investigated by the FRC for publishing grossly misleading 2015 accounts. As such his share purchase equated to just two days earnings. That was a sell signal not a buy. Such spoofing confirms the increasingly widely helf view that Williams is just a tosser who is not up to scratch.
Secondly the market has woken up to the fact that the trading statement showed that Avanti had LIED with regard to its need for more funding - see HERE.
Thirdly, Avanti's behaviour - issuing lawyers letters to gag Bulletin Board posters whose only crime is reporting known facts - is the sort of thing that companies only do when in deep financial trouble. Equally, making pathetic appearances in front of the camera round at the felon Champagne Charlie Gibson's prostitute reasearch firm Edison, simply cuts no ice anymore.
Fourthly, no-one believes Avanti's May 16 claim that it will hit FY revenue targets without (another) almighty accounting fudge. So far this year it has clocked c$51 million in sales in three quarters, does anyone really see it clocking $39 million in Q4?
And critically, Avanti clearly needs to raise cash fast. It is heading rapidly towards lights out time. It is already drowning in debt and the yield on its existing bonds is well over 20%. On that basis folks find it hard to see how it could raise more debt at anything other than credit card plus rates. So will it need to raise equity as well? What is going on?
The share price action, the 25 day collapseroonie since the trading statement and spoof of a share purchase tells you that Avanti is in deep merde. On Monday Williams needs to clarify how his company is going to achieve sales forecasts without accounting fiddles. Please note that normal folks will consider the Bongo Bongo land fiddle (HERE) a fiddle.
He also needs to come clean on the company's financial position and attempts to refinance. If he really wants to help he might also offer up his resignation. Williams is now seen as a key part of Avanti's problems not as assisting with a solution to those problems.
The shares remain a sell. The target price is 0p.
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