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By Cynical Bear | Monday 11 September 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.
I despair somewhat when I read the likes of Friday’s announcement from Polemos (PLMO) as I can’t really believe that companies on AIM can get away with the most over-used spoof in the market, namely the “shares being issued at a premium as consideration in an RTO” spoof, but I guess I may well point it out in the vain hope that, one day, CEO’s and Nomads will pen a more honest RNS.
On Friday, Polemos announced the potential acquisition of SecurLinx Corporation, a business in the cybersecurity / biometric space. It will be acquired solely by the issuance of about 50 billion shares (current share issuance of 5 billion) and it stated that the shares would be issued at 0.035p valuing the acquisition at over £17 million.
As it is an RTO, the shares will be suspended until completion of due diligence and the publication of an Admission Document. In the meantime, Polemos is lending SecurLinx $500,000 to enable it to secure new sales, leaving Polemos with not much left in the kitty.
As a result, on Friday the shares were suspended at 0.0215p and the new shares will be issued at a significant premium to that at 0.035p. What a result for the existing shareholders – what’s not to like?
Well nothing really, other than the fact that it is meaningless tosh. One has to look at what is really happening here.
No new money has been raised at that 0.035p price, although one has to suspect that more funds will be needed soon, although that will in part depend on what happens with Polemos’ existing convertible loan of £500,000 to Oyster Oil and Gas so I assume it is waiting to see how that plays out first.
Accordingly, as things stand, the existing investors will end up with about 9% of SecurLinx and regardless of the arbitrary £17 million being bandied about, one should do their own research to try to ascertain the value of that business. One would hope that there would be more information in the forthcoming Admission Document but in the meantime, I thought I would have a look at their website and do a bit of googling.
SecurLinx was started in 2003 and its website looks as if it comes from around that time as it’s pretty dated. It’s always interesting to go to the recent news section to see what the company has been up to and I was surprised to see that the latest coverage was from April 2012, over five years ago!
Hmmm, not a particularly encouraging start. Some further research gives the impression that this business has been around the block a bit. It appears to have ended up listed in the US for some time around 2008 and the next I can see it popping up on the Frankfurt stock exchange in early 2012 and can’t find much since.
I am unable to find any evidence of a profitable existence or of much recent activity and so I’m assuming that the statement that, in the year ending 31 December 2016, SecurLinx reported a loss before tax of US$553,756 was merely the executives being paid with limited revenue. I am happy to be corrected as and when further information is available although it was interesting that no revenue figure was stated on Friday.
On the positive side, cybersecurity is clearly a pretty hot area at the moment and perhaps the management team will finally find a golden vein of new business following 14 years of hard graft and missed opportunities now that it has some money to spend.
Perhaps but, either way, I can’t see how one would value it at £17 million today, so although I don’t wish to burst anyone’s bubble, if you are a long-suffering Polemos shareholder, I wouldn’t be putting down my deposit for the Tesla just yet.
I’ll reassess if and when the Admission Document comes out.
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