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The broker that raised £10m for Advanced Oncotherapy downgrades its stance on the dog to hold - damning note

By Tom Winnifrith, The Sheriff of AIM | Monday 27 February 2017

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.

If you had raised £10 million for the AIM dog Advanced Oncotherapy (AVO) less than 5 months ago at 100p then your stance on the stock - at 54p-58p- would be some sort of buy. Oh no. broker Beaufort who did indeed raise that cash has today downgraded its stance to, what may be termed a corporate "hold" (i.e. sell) and makes it clear that the shares will fall allowing lower entry points. I should cocoa. Beaufort today opines after the Bracknor death spiral announcement of Friday - the underlines are mine:

Our view: Quite simply, investors consider standby-equity-distribution-agreements (SEDAs) or large unsecured convertible-loan-note offerings (whose conversion is not at a significant premium to VWAP) to be toxic. They are a financing facilities that can effectively create sizeable equity overhangs at or below the existing market price. Others that have employed such facilities, either with Brackor Investment Group or one of its numerous peers, have on occasions seen their equity prices pressurised for extended periods as the lender effectively saturates the market with discounted equity.

Even if the lender does adopt a more responsible attitude to off-loading newly converted equity positions, investors are likely to remain concerned that such new holders do not necessarily share the interests of existing ordinary participants. AVO's near term funding needs are already well understood, although the expected terms of the non-dilutive financing plan outlined on 23rd January along with Metric Capital's facility were expected to plug the gap without the need to resort to any additional arrangements, such as the one announced on Friday or perhaps another deeply-discounted equity placement.

Indeed, the biggest surprise of all is that AVO's giant French manufacturing partner, Thales Group, which appears to have made a deep commitment to the development and prospective production of LIGHT was itself not the one satisfying the funding requirement – this would, after all, have been an obvious way of reinforcing its commitment to the project while also fending off any first generation proton beam system providers (such as Elekta, IAM, GE, Mitsubishi, etc.) who will undoubtedly be interested in getting their hands on LIGHT technology once it has been successfully prototyped.

So the bottom line is that, such a large CLN financing arrangement on these terms can be expected to retrain the equity's performance for the foreseeable future. Of course, investors and analysts will be provided with a LIGHT technical development update in London and Zürich in the second week of March and this may help convince non-believers that the science will eventually turn into an extremely valuable commercial opportunity.

Anticipation of this could temporarily boost the equity price, but the reality is that shareholders have become somewhat tired of waiting and may now consider they would prefer to be exposed when the Bracknor facility has eventually closed and the technology is seen to delivers against best expectations. This may take some time.

Beaufort accordingly, with something of a heavy heart, has decided to downgrade AVO to a Hold (from Speculative Buy) and looks for a better time to recommend investors expose themselves once again.


You can tell Beaufort is pissed. Its analysts were lied to. Advanced told it that there would be non dilutive funding from Thales. There was not. Instead there was a daeth spiral. Hell has no fury like a broker lied to.  This note does not, however, address the issue of how its loans from Metric ( now £11 million) may well now be in deafult within weeks. 

There will be no better time to get back in. This is going to zero. Indeed it could be insolvent within weeks if Metric calls in its existing facility as I explained HERE.  When that happens will Beaufort finally be brave enough to say SELL. Why wait?  My target price remains 0p.

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