By Tom Winnifrith, The Sheriff of AIM | Friday 15 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.
Companies that tell lies to investors are ones that should be avoided like the plague. If you pick a company up on one lie the odds are that there are stacks of others going undetected. That brings me to Applied Graphene Materials (AGM) where I will demonstrate a slam dunk lie. Then we will turn to its looming cash crisis.
Applied has been promising jam tomorrow for years in order to keep the placings going and the grotesque pay packages of the board fully funded. But on 14 October 2016 it seemed that the jam had arrived. I quote:
Applied Graphene Materials, the producer of specialty graphene materials, is pleased to announce that it has secured its first production order and commercial application.
Applied Graphene Materials has supplied its graphene material for use in the production of a range of high performance fishing rods, made by Century Composites Ltd ("Century"). Century has introduced a new range of fishing rods to the market, containing the Group's graphene nanoplatelets. These fishing rods are being sold under the brand Graphex.
Simon Chilcott, Managing Director of Century, commented:
"We are delighted to have launched our Graphex range of rods which are now available. The development collaboration with AGM has been impressive and we are delighted by the added performance that their graphene nanoplatelets bring."
Fabbo. Except it was a total fucking lie.
Mr Chilcott could not have said that as Century had not actually launched the rods at all in October 2016. Instead it was expecting to launch in 2017. I have seen evidence from Century confirming this and so has both the FCA market abuse team and the Nomad and broker N+1 Singer. But apparently telling total lies is not a problem on AIM these days just like insider dealing is all fine and dandy on the Casino.
One can understand why N1 would not want to rock the boat. Having raised £19.5 million (so netting brokers commission of almost £1 million) to date and spunked nearly all of it there will have to be a big placing soon by Applied. Yum Yum you can almost smell that 5% commission, extra coke and hookers all round at the Christmas party.
Here's the maths. At January 31 cash was £5.554 million but net current assets were just £5.01 million. The underlying cashburn in the prior six months was £2.293 million which means that - allowing for some warrant exercises - by the time finals are published in mid-October net current assets will be c£1.45 million. Clearly Applied will not have the resources to stay solvent for 12 months, indeed it will not make it much beyond the January sales. And that will be flagged up as an emphasis of matter statement by the auditors.
In May the company stated that its full year (EBITDA) loss would be double the H1 loss at c£4 million and cashburn in H2 would be just £1 million ( down from £2.3 million in H1). That looks odd. One can only conclude that capex and paying bills were deferred post the year end but the auditors will not ignore trade payables as they consider an emphasis of matter as at mid October. On results day it is a slam dunk that net cash well down on that £4.5 million number and net current assets will start with a 1.
So the shares, 220p sixteen months ago have fallen steadily to just 120p giving a market cap of £27 million. The stock is illiquid so any placing will be at a steep discount. But this is a company that LIES TO INVESTORS which surely means that it is a bargepole. Ahead of the placing GET OUT WHILE YOU CAN.
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