By Tom Winnifrith, The Sheriff of AIM | Friday 30 December 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.
In the long run buying shares in companies that break accounting rules, commit fraud and which are running out of, other people's, money is a recipe for poverty and thus AIM listed fraud Eden Research is my second share tip of the year, like my first (Cloudtag HERE) it is as a sell. The shares are now xxp but this is a sell at any price down to 0p. Frauds are always worthless in the end.
Eden has been going 21 years and has sent £34 million of other folks cash to money heaven to date and there is no sign whatsoever of it turning a profit. It was the sister company of Environmental Recycling (nee 3DM) which was on AIM until it finally went bust earlier this year. 3DM was also a fraud.
I first encountered the two companies back in 2005 when I exposed the frauds and got a stack of lawyers letters for my trouble. The FCA (FSA as was) got around to nailing 3DM but Eden was at the time on ISDX (Plus as was) and so slipped under the radar. It has struggled on getting away placing after placing on promises of jam tomorrow.
The scale of the fraud ramped up in August 2015 with what is termed a panama pump fraud involving a closely linked company Terpenetech. Eden first committed fraud with Terpenetech back in 2011 booking 100,000 euro of revenue for some deal which was held on the balance sheet as a short term asset ( ie sum due within a year) for more than four years without being paid. But in August 2015 Terpenetech paid Eden £600,000 for some useless IP asset and raised that cash by dumping shares which Eden issued to it to but a 29% stake in Terpenetech.
That share dumping also allowed the payment of the invoice from 2011. If course Terpenetech has barely ever traded and had no tangible assets and so all cash and thus the idea that it was worth £3 million ( as Eden stated) was risible.
This was a plain and simple panama pump fraud and in the end this will all come out and destroy this company. That Nomad Shore Cap has not resigned but has instead raised fresh funds for Eden on the back of the laughable 2015 results (nearly all sales being from the panama pump fraud) tells you all you need to know about the moral vacuum at Shore Cap. But it may see the light.
Perhaps it will see the light after today's revelation HERE of the lies and breaches of accounting rules in the dire interims Eden snuck out the other day? That Eden had to be so naughty was all about covering up the Terpenetech fraud and often - as Richard Nixon discovered - it is the cover up rather than the crime that sees the bad guys nailed.
As a backdrop to all this, Eden is burning cash at an alarming rate. As of today cash minus trade payables is c£1 million and cashburn is running at just over £100,000 pcm. Thus by the time the 2016 accounts are audited in the spring the company will either have had to raise fresh equity or it will face an emphasis of matter note in the report. To Shore Capital I say that to raise money for a proven fraud once is understandable, but to do so twice looks like carelessness. Is it not better to walk now because at some stage this year the Terpenetech annual report will land at Companies House and the paucity of its sales will show clearly the scale of the panama pump fraud Eden has committed. Surely Shore would want to jump ship ahead of AIM Regulation being forced to confront that official document and the ghastly truth?
A fraud rapidly running out of cash and lying in RNS statements as it breaks accounting rules and which after 21 years is still an eternity away from generating cash: what could possibly go wrong? At 11.5p the market cap is a stonking £21 million. that is a joke. Sell.
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