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By Nigel Somerville, the Deputy Sheriff of AIM | Sunday 19 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.
AIM-listed Servision (SEV) still looks to be a story too good to be true. With the company scraping by on boardroom emergency loans and running out of cash, along comes Cascade which agrees to pump in boat-loads of cash at more than 400% of the prevailing share price. We have been told that the first tranche of shares has now been issued (and, indeed, admitted to trading on the Casino), and the cash received. But we’ve not had a TR-1. And why is the company’s AIM Rule 26 major shareholdings web-page almost a year out of date?
Under AIM Rule 26 the required data is supposed to be updated at least every six months, but it has not been since at least 26 March of last year as can be seen in the screenshot below. Perhaps Nomad Allenby would care to remind its fine upstanding client of its responsibilities in that regard.
Whilst we have had most of the questions we were asking about this deal with Cascade answered, such as the nature of the guarantee offered by Chairman and CEO (corporate governance Red Flag) Mr Gidon Tahan, there are still a few anomalies.
Firstly, whilst the company has stated that it has issued the first tranche of shares to Cascade, that Cascade has paid over the cash – with confirmation from AIM that the shares have been admitted to trading, we’ve not had the formality of a TR-1. Yet the shares in question represented over 5% of the company.
Now it could be that Allenby and the company think telling the market that Cascade has the shares is enough, and that I am being a pedant.
Or it could be that Cascade does not hold the shares because it has sold them – at what would be quite a loss pro tem. Of course, if that were the case and then Servision was required by Cascade to buy the shares back again at the end of the deal (in under two years) at the issue price then perhaps Cascade could either help the company out by subscribing for a discounted placing or just pick up the shares to be handed back very cheaply in the market nearer the time.
Perhaps the company might care to offer a TR-1 so that we can all see that Cascade continues to hold all those shares unencumbered.
Secondly, and once again please do call me a pedant if you will, but I don’t seem to recall Servision mentioning anything about issuing more shares to Cascade – for free – in the event of some pre-outstanding warrants or options being exercised.
Yet this is exactly what has happened – see HERE. Indeed, not only does Cascade now get more shares for the same amount of cash in tranches 1 and 2 of the deal, the exercise prices previously advised in relation to options to take further stock has dropped too.
So what other terms in this funding deal with Cascade have not been disclosed? And if Cascade come knocking on the door early in 2019 wanting its money back (as it can, provided Servision hasn’t got a full listing or made it on to Nasdaq), how might the company plan to meet this potential liability?
It still all seems too good to be true and I continue to give this stock a very wide berth.
It just smells all wrong to me.
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