Sunday 19 November 2017 ShareProphets: The one stop source for breaking news, expert analysis, and podcasts on fast-moving AIM and LSE listed shares


MySquar - the bollocks trading statement and crazy valuation

By Tom Winnifrith, The Sheriff of AIM | Tuesday 4 July 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 ramp de jour MySquar (MYSQ) has today boasted that in the last days of June as daily sales reached $8500 "the business has reached a very significant milestone of achieving run rate operating breakeven". Er..can you smell the red herrings - they are hidden underneath the red flags.

How does this company define "operating profit"? In its interims to December 31 it has one measure of operating profot which I would define as gross profit which is + $128,896. It has another - also described as "net operating loss" which is MINUS $1.58 million. I think I'd define that as pre-tax profit/loss. Which measure is it? Or is it a third? That is to say profits before PLC costs ( that is how I'd define operating profit). All is unclear and this landmark was achieved for just a few days. One can always spike sales with a mega marketing push. Can that be sustained?

The company singularly fails to say that it is generating free cashflow and you can bet your bottom dollar that it is not.

That is not the issue here. Over round at Belfort Securities broker Jon Bellis is licking his lips and thinking about his next 5% commission job. No doubt the excuse will be "working capital for expansion" or "demand from existing and new institutional investors" but a bucket shop placing at a steep discount is almost certainly on the way. Look at the maths.

At December 31 the company had net current assets ( charitably) of MINUS $200,000. At the time of the interims on 30 March the company had funded itself with junk debt from Sandabel which has since been converted into shares. Bellis earned a good commission on a fund raise of £2 million gross post interims and the company netted c £350,000 as Belfort exercised - and no doubt flipped - warrants it got for arranging that placing. There were fees for terminating the junk bond so lets assume a net inflows of £2 million - $2.6 million.

The cashburn in H1 was c $1.5 million so even if there was a sales uptick from May right now net current assets are not going to be that much more than $1 million. If one - and this looks a safe bet - assumes that MySquar is still burning cash by the time finals are presented net current assets will almost certainly be sub $500,000 and in order to avoid an emphasis of matter comment from the auditors team Belfort will be calling the bucket shops again.

The market cap is now - at 5.45p - £31.83 million. For a business with bugger all asset backing, which is almost certainly burning cash and which - as our coverage HERE demonstrates - is drowning in red flags that is a total joke. Sell.


Filed under:


Never miss a story.




This area of the ShareProphets.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ShareProphets.com. ShareProphets.com does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ShareProphets.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ShareProphets.com and is not intended to be relied upon by users in making (or refraining from making) any investment decisions.


More on MYSQ


Comments

Comments are turned off for this article.




Site by Everywhen