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By Nigel Somerville, the Deputy Sheriff of AIM | Tuesday 25 April 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 Advanced Oncotherapy (AVO) – teetering on the brink of having to call an EGM to reduce its nominal share capital under the terms of its death-spiral funding package with Bracknor – has announced yet another director share purchase, the fourth just this month (if we ignore the botched 7am RNS of 4 April). As ever, this is just a spoof in order to encourage more buying in the market so as to allow Bracknor to offload more of its death-spiral conversion shares as Advanced hopes and prays for the next £1.235 million tranche of funding before the coffers run dry.
Just this month Advanced Oncotherapy has now announced purchases by NED Dr. Enrico Vanni yesterday (100,000 @ 26.96p), a further 100,000 @ 27.5p on 12 April and 25,000 @ 29.25p to add to 75,000 @ 28.67p purchased on 3 April. That is a total of 300,000 shares across four reported transactions in the space of three weeks at a total cost of £83,275 plus expenses.
This, added to 25,000 shares @ 87p announced 3 January, 25,000 @ 66p announced 29 December, 25,000 @ 59.75p announced 22 December, 25,000 @ 56p and 25,000 @ 55p announced 21 December, 25,000 @ 50p 20 December and 75,000 @ 64.7p announced 29 November (twice, after botching the first attempt).
That is 11 trades all reported via RNS since 29 November 2016 – an average of about one every two weeks over a five-month period – reporting total purchases of 525,000 shares at an aggregate cost of about £225,000.
The immediate question, given that Advanced has had to raise cash via the Bracknor death-spiral package after failing to get its long-promised “non-dilutive” funding away which should have triggered a £24 million funding package with Metric Capital last year, is why the good Dr Vani didn’t just go to the company and say “hey, chaps, I’m so convinced about this company as an investment – even though the entire order book has just disappeared in a puff of smoke – and I know the coffers are looking a bit forlorn, how about I lob in a few shekels to keep the lights on a bit longer while new funding is found?”
It may not have added up to the £24 million previously announced (but not delivered) last May, and it may have been dwarfed by the placing and open offer in the autumn, but with Advanced’s £1 million a month historical cashburn and a Harley Street clinic to build/renovate you would have thought that the company would have bitten his hand off.
Instead a long series of market purchases which have seen an ever decreasing effect on the share price has not raised a cent for the company and – given the current 27.75p mid (last seen) left him rather out of pocket.
And, of course, issuing RNSs costs a few quid each time too, so the whole exercise has cost the company – and Dr Vanni – money when a substantial NED investment directly into the company of the best part of a quarter of a Bernie in one go might have had a greater effect on the share price and kept the wolf from the door a while longer.
It’s another spoof – with the dual purpose of encouraging buyers into the market so as to ease the way for Bracknor to offload its conversion shares (and get Advanced nearer to being able to draw the next tranche of Bracknor cash) and to try to get the share price back over the critical 27.5p mark – below which ten consecutive end-of-day closes (although which closing price, be it mid, bid, offer or some other measure is not defined) will trigger an EGM to drop the nominal price of the shares. That would be a tad embarrassing for the board.
Before Easter weekend Advanced racked up two closes with a mid-price below 27.5p and three with bid prices under 27.5p. Last week (another four-day week) saw three mid-price closes below 27.5p and four bid price closes below 27.5p. Yesterday both mid and bid closed below 27.5p.
By my maths, if the 27.5p trigger is with reference to the closing bid prices then today threatens to be the ninth consecutive breach and another tomorrow would trigger the EGM.
So far today the shares have picked up on the news of yet more NED buying, but the bid price is still only 26.5p and even the mid is only a quarter of a penny above that all-important 27.5p mark.
Perhaps Dr Vanni, having taken 525,000 for the team already since late November, will be called upon to get to the million mark. Meanwhile Bracknor is still less than half way through converting the first tranche of a minimum of ten – and up to 20 – of £1.3 million (nominal) loan notes.
This all smacks of desperation by the company: keep selling, further downside is only a matter of time.
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