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HaloSource – Chinese investor approval “not been granted”, currently c. 21 days to insolvency for another of Woodford’s dogs

By Steve Moore | Friday 9 June 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.


Writing on HaloSource (HALO) last week, I noted funding delay from China now leaves no margin for error. There is now a “Further Update on Fundraising” announcement, which includes “the Chinese governmental approval has not been granted”. Uh oh.

On announcing the £1.9 million fundraising it was stated to be expected to provide the company with “sufficient cash to fund it through to Q2 2018”. I noted that this just looked to, not very far, ‘kick the can down the road’ – as even on the company-stated trajectory, by the end of this year a scramble for further funding would likely then be commencing. Adding that is of course only if current funding is able to be completed in time.

This was particularly with the fundraise “conditional upon, amongst other things, one of the cornerstone investors to the fundraise receiving certain Chinese governmental approvals” and remaining cash only “expected to fund the company until the end of Q2”.

At that point a completion date of “on or prior to 31 May 2017” was stated. Then on 30th May came an update that “at this stage, receipt of such governmental approval is progressing” and that it had been agreed to extend the date to 30th June, with it added this considered “a sufficient timescale for the government approval process to be completed”.

That saw me warn on there now no margin for error and that the stance remained bargepole/sell. It is now though updated that the Chinese approval “has not been granted”, with it then added that the investor “has advised the company that it will now be seeking to make another application for that approval”.

Hmmm – why will the outcome be any different this time? And, even if it is, how long will it take? – for it is explicitly reminded;

“Without the proceeds of the fundraise, the company's cash position is expected to fund the company until the end of June 2017 at which point the company will cease to trade as a going concern. Therefore, if the fundraise does not complete prior to the company exhausting its cash resources, the board will have no choice but to initiate insolvency proceedings and seek suspension to trading of the company's shares on AIM and shareholders may lose all or a substantial amount of their equity investment.”

You’ve been warned again, though I’ve copiously warned before. The stance remains bargepole/sell.


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