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Advanced Oncotherapy - back at 31.5p - is Bracknor dumping or spoofing today? Timber!!!

By Tom Winnifrith, The Sheriff of AIM | Thursday 23 March 2017

Disclosure: Financial Investigative Media Limited, which is not owned by Tom Winnifrith but by a trust for his dependants, owns shares in companies mentioned in this article. 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.

It is just eight days to the GM of Advanced Oncotherapy (AVO) where shareholders are being asked to approve the issue of gazillions of new shares for the Bracknor death spiral. Since the alternative is going bust within weeks if not days then the result is a gimme although I intend attending - as the owner of 1 share - to ask some searching questions. But the collapse in the share price - the stock is now 31.5p mid, 30p bid tells you there are even bigger issues and that Advanced is, quite possibly toast whatever.

I revealed on Monday that the share price had been supported by death spiral provider Bracknor buying shares in the market. This has just not happened before in the history of death spirals and so must be a spoof surely? A desperate attempt to stop the share price collapsing. But what it clearly does mean is that there is an overhang of 829,410 shares owned by Bracknor which it will have to dump. But it gets worse.

It also has loan notes with a face value of £1.94 million which it has to convert - that being £1.2 million of the first £1.3 million nominal advanced plus its arrangement fee of £740,000. At around the current share price that would be at least 6 million more shares.

It is incredibly unlikely that Bracknor will advance Advanced another £1.3 million gross, £1.235 million net by issuing another loan note while its outstanding exposure in terms of cash out is £1.235 million ( loan note 1) + market purchases of shares = c £1.5 million.

Death spiral providers just dont take such risks. So one can only assume that Bracknor will need to dump all its shares before advancing Advanced any more cash. But that is a problemo. Volumes so far today ( at 12.43 PM) are sub 400,000 shares. Trying to flog circa 7 million shares will a) take some time and b) utterly crush the share price.

If it sees the shares go through 25p Advanced will have to call another GM to work through a capital reconstruction to reduce the par value of its shares to allow Bracknor to continue converting in an in the money way. Until it does that Bracknor would not be able to convert under the terms of its death spiral deal. Meanwhile there is the time element.

The last numbers we have from Advanced are for the six months to June 30. At that point trade receivables & loans due exceeded trade receivables, tax refunds and cash by £2.24 million. But paid shrills will rightly point out that since then Advanced has taken in c £10 million from a placing and open offer and c£1.2 million from Bracknor so let's call that £9 million to play with. However in the first half of calendar 2016 operational cashburn including capitalised R&D but excluding tax refunds since I assume above that they have all come in) was just a smidgeon under £9 million. That was in six months.

We are now almost nine months advanced from the interims. Now, I know from my sources, that Advanced has pulled in its purse strings, but even so the maths are pretty clear: it is by now almost out of cash. It urgently needs Bracknor to advance it another £1.235 million NOW but Bracknor cant do that until it has dumped 7 million share on the market which is proving well nigh impossible.

Question 1 at the GM - is just how many days are you from a point where you are insolvent or are you there already?

The shares are a stand out sell with a target price of 0p.

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