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Advanced Oncotherapy – a last-ditch effort to avoid an EGM?

By Nigel Somerville, the Deputy Sheriff of AIM | Monday 15 May 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.

Well it looks as though D-day is today after all for the triggering of an EGM to drop the nominal (par) price of AIM-listed Advanced Oncotherapy (AVO) stock so as to allow Bracknor to resume its convert-and-dump operations. With the shares edging a little higher this morning, one is tempted to wonder whether some heavy boardroom buying might be enough to lift the shares back over the 27.5p mark just in the nick of time. But there is a fair way to go, with the stock still 2.25p short of salvation.

Under the terms of the Bracknor death-spiral funding package, we were told in the EGM Circular which was called to give the company authority to issue conversion shares, ten consecutive closes below 27.5p would trigger an EGM with proposals to drop nominal by at least half. But the closing price of 27.5p was undefined as to whether it was mid-price, bid-price or some other measure (perhaps daily VWAP).

Had it been bid-price then last Friday would have been consecutive sub-27.5p close number ten, but no RNS was forthcoming this morning.

And so the next target is mid-price – and today will be number ten if we close below that mark.

Bracknor is currently unable to convert any more of the loan notes issued into shares because the conversion terms are that new shares would be issued at the lowest daily VWAP (volume-weighted average price) over the 15 days ahead of conversion notice being served. With the shares having visited prices well below their nominal (par) mark of 25p, it would mean issuing shares at below par which isn’t allowed. So Bracknor is lobster-potted for the time being. Of course, it would still be free to offload any shares it still holds, but one would imagine that to be a largely academic matter by now.

From Bracknor’s point of view, it has stuffed a load of cash into Advanced and hasn’t yet been able to recoup the cash already put up because it has only converted about £0.7m of loan notes and has had to pony up £2.47m. Bracknor isn’t a charity and will want to get back to break-even as soon as it can.

As such, if it can’t convert it will want to force an EGM to drop nominal as soon as it can. The lack of an RNS this morning suggests that the defined closing 27.5p price for the EGM trigger was not the bid price.

So is the trigger based on mid-price? Might the company care to explain to its shareholders?

For surely if the EGM is triggered by a sub-27.5p close today, Bracknor will force the company’s hand as a matter of priority. After that, assuming an EGM – which would then have to be called within 45 days - rubber stamps a capital reorganisation Bracknor can get back to the execution of its business model: that of selling stock as fast as it can.

And that would surely see the shares of Advanced crunched down ever lower – hence the view that if and when (emphasis on the latter) an EGM is triggered the shares will fall off a cliff

Will the trigger be averted with a close above 27.5p today? I rather doubt it, but even if it is it would surely only be a matter of time before the tide could no longer be resisted.

At risk of broken record syndrome, Advanced Oncotherapy remains a slam-dunk sell.

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