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Filthy Forty MoneySwap – new rescue deal in the offing but time running out

By Nigel Somerville | Sunday 12 March 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.

ShareProphets AIM-China Filthy Forty play MoneySwap (SWAP) announced last week that it was in discussions with a new potential white knight saviour in the form of Wraith Holding BV, a Netherlands-based vehicle of a Mr Gilbert Armenta which has been incorporated for the purpose of investing into the company. But time is running out: having been suspended pending accounts since 21 September last year the company only has until a week on Tuesday to get both Finals to March 2016 and interims to September released or its AIM-listing is toast.

The detail of the announcement, released at no-one-is-watching o’clock (5.31pm) last Monday, disclosed a series of deals under which Wraith will take on existing loans to the company from Leading Empire Group ($248,400), Avance Development Corporation ($781,748) and Changsha Zhangdian Investment Co. Ltd ($395,000) – a total of $1.425 million – subject to completion of a major fundraising.

There is also a loan facility being provided of up to $725,000 – of which we are told $297,000 has been drawn and which has predominantly been applied towards completing the Company’s audit for the year ended 31 March 2016 and finalising the Potential Fundraising.

So that suggests that the company is already under water to the tune of $1.722 million. Call that about £1.4 million.

This loan is secured on the shareholdings in the company of various unconnected shareholders in Moneyswap by way of charge agreements between Wraith and the unconnected shareholders over…..59.4% of the Company’s existing share capital.

As regards a fundraising, we are told that it is expected to involve a significant investment by Wraith, by way of a subscription for new ordinary shares….which it is expected will represent 75% of the…enlarged and fully diluted share capital.

MoneySwap Chairman, Mr Craig Niven, is quoted as expressing his pleasure at announcing the involvement of Wraith, which has a real vision as to how the Company can be developed and the financial and management resources necessary to achieve this vision.

So if I have it right, Wraith is planning to invest into a company which is underwater to the tune of some £1.4 million, and it sounds as though it has a plan. We are not told anything about what that plan involves. Does it involve the company’s hitherto business, or a new venture?

What I find puzzling is why anyone would want to invest new cash into a company starting at minus £1.4 million. Why would anyone then want to lob in further cash for just 75% of a company currently underwater by that much?

At the suspension price of 0.135p MoneySwap was valued in the market at £1.6 million. Surely with the debts piled up since then (in order to keep the lights on) the value has drained away to a large extent – not to mention the cessation of the e-wallet business as announced in October.

This all looks like very good news for MoneySwap’s long-suffering shareholders. Will the shares even resume trading – certainly against my expectations? We were told in October that it was going to convene a General Meeting so as to get shareholder approvals for various enabling resolutions to allow the investment to proceed. That, of course, was a potential investment by Hunan Commodities Trading Centre Company Limited and so we are on to a new transaction.

But it looks to me as though a GM will still be needed to complete this fundraising with Wraith – the terms of which we are told are yet to be agreed.

Does the company need to get the investment secured ahead of the lifting of the suspension? If so, is there even time to call and hold a GM which could be required to get it over the line? All by a week on Tuesday? I rather doubt it.

Will Wraith walk if the AIM-listing is lost?

Perhaps all that is needed is the publication of outstanding accounts - but even that is quite an ask, given the timetable.

There is much to be clarified, but since shareholders are currently lobster-potted I guess there are just two outcomes available: that the deal falls apart and shareholders lose everything, or just possibly the stock resumes trading.

But I still wonder why Wraith is interested at all – it just sounds too good to be true.

It seems to me that either Wraith has a plan for the existing businesses which would suggest that the company could and should have done very well already but something prevented it, or that Wraith is coming in with a new business – in which case one wonders why not just start from scratch with a clean company and list that instead of settling a stack of debts which surely outweigh the cost of getting a new listing.

It will be an interesting few days ahead. My view is that delisting still looks the most likely scenario but it is just possible that some good could yet come from this particular Filthy Forty disaster story. The question would then be why it was not possible under the old regime.

That good outcome would mean shareholders holding paper in a company 75% under the control of just one person – hardly the very model of good corporate governance, is it?

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