The one stop source for breaking news, expert analysis, and podcasts on fast-moving AIM and LSE listed shares


Advanced Oncotherapy part 2: how broker bullshit cons mug punters so allowing placing after placing

By Tom Winnifrith, The Sheriff of AIM | Saturday 18 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.


Beaufort Securities is joint broker to grossly over-ramped Advanced Oncotherapy (AVO). That means a fat retainer and also a good slug of the commission earned for the regular placings this company needs to keep paying its bloated boardroom payroll and other costs. The commission on the May 2015 fundraise at 8p would have been £1 million. Coke & hookers all round! Except for the shareholders, that is, as the share price is now 5.25p and its going to fall further as the next placing is imminent. So how do you ramp a stock ahead of a placing?

Belfort Securities initiated its coverage in September 2014 with a glossy and detailed note. Boy was it ramptastic and it helped start pushing the shares from 4.7p to a ramptastic peak of 15p. I now bring you an excerpt from that note which is still availlable on the company's website:

The existing order book
During 2013 agreements were signed to provide eight LIGHT systems to locations in both the UK and the USA; the order pipeline includes ‘letters of intent’ received from Spire Healthcare and BMI Healthcare and now stands at over £200 million in value. Manufacture and installation of the first machine is currently scheduled to get underway early in 2016. Milestone-related stage payments are anticipated from purchasers of the devices, which could make significant contributions to Group cash flow.

Ends.

Fantastic. Except that it is bollocks. On 29 March 2016 the company said

The development of the LIGHT system remains in line with the timetable provided to shareholders in November 2014 and the Company will continue to update shareholders on the progress made during the further integration and testing of the modules which is expected to continue up to the end of 2016.

Ends.

Sadly that November 2014 presentation does not seem to still be on Advanced's ramptastic website. But one assumes it is pretty similar to the Belfort assessment as Advanced said that the November presentation contained no price sensitive ( as in our brokers forecasts are wrong) information.

When Belfort says "During 2013 agreements were signed to provide eight LIGHT systems to locations in both the UK and the USA" that is of course not really true at all. Six of those ""agreements to provide" were in fact Letters of Intent which are not legally binding. So it might now, almost three years after Spire & BMI signed LOI's to buy a total of six machines, be worth Advanced telling us if a LOI has become a firm contract and if not why not? I have put the question to Advanced and not got an answer.

So installation of the first machine would be underway in early 2016 ( Belfort pre placing) now becomes "integration and testing up to the end of 2016" - Company update. As for those milestones that were going to make a "significant contributions" to cashflows, that is more Belfort pre placing Turkish as well.

So where are we now? As at December 31 2015 net current assets were c£8.5 million but cashburn last year was £9.5 million. There have been a few trivial option exercises but its fair to say that by December 31 2016 this company will be essentially out of cash. Bust. So that is one reason why a mega placing is needed. Reason two is that the company needs yet more cash as a condition for drawing down a £24 million loan offer.
Last month it announced ""24 million financing secured for Harley Street." Actually that headline was a lie. Because it was secured on one condition. In the words of Advanced:

Of the £24 million financing, £11 million will be received shortly following signing. The second tranche of £13 million will be available for drawdown on completion of a £25 million cash or capital injection to fund the development of a manufacturing base. Should these milestones not be achieved by the end of March 2017, the initial £11 million tranche will become repayable by September 2017.

Er... right. So Advanced needs to get £25 million to go ahead with this loan and then another £10-15 million to pay Michael Sinclair's gym fees, pay Alan Green to go to ramp the shares on Justin The Clown's podcast without mentioning his commercial link and to keep the fecking lights on.

The shares have tumbled to 5.25p but given all that confetti that Belfort Securities has helped to issue that values the company at £74 million. Ahead of a mega fund raise and with no sign of "significant" cashflows in sight that looks far too high.

I guess its time for Belfort to publish another glossy note fill of horseshit.

The shares remain a sell.



Never miss a story.




This area of the ShareProphets.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ShareProphets.com. ShareProphets.com does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ShareProphets.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ShareProphets.com and is not intended to be relied upon by users in making (or refraining from making) any investment decisions.


More on AVO


Comments

Comments are turned off for this article.


Site by Everywhen