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Applied Graphene - the proven liars undertake £10 million fund raise at just 36p - bear call at 120p 4 weeks ago vindicated

By Tom Winnifrith, The Sheriff of AIM | Tuesday 10 October 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.

On September 15 2017 I explained why the folks who run Applied Graphene Materials (AGM) were slam dunk proven liars and predicted a bailout placing. Hey ho. Vindication did not take long. Today we are told that there is a book build on a placing to raise £9 million + at a minimum of just 36p with a £1 million open offer also planned. The shares have crashed by 23p to just 40p bid. Another win for the Sheriff.

Results out today are better than I expected but still crap. H1 revenues were £168,000 and full year (to July 31) sales were £265,000 - hardly an indicator of a company making dramatic progress. The operating cash outflow was £3,962 to which you can add a £95,000 adverse working capital movement (folks not paying bills?) and a capex bill of £684,000 to mean that just over £4.7 million was sent to money heaven.

cash at the year end was £4.708 million but strip out trade receivables (small) and payables (£910,000) and net current assets were just below £4 million. With no sign of any sales since the year end one can safely assume that net current assets as of today are well below £3 million. Hence this statement

The Company is proposing to raise equity funds via a placing and open offer. After making enquiries and producing cash flow forecasts and considering the additional funding expected from the pending share issue, the Directors have reasonable expectations, that the Company and the Group will have adequate resources to fund the activities of the Company and the Group for at least twelve months. Therefore, the preliminary financial statements have been prepared on a going concern basis.

In other words, without the placing the auditors would have raised an emphasis of matter note.

So what will the cash be used for?

The Net Proceeds of the Placing and Open Offer (together the "Fundraising") will be used to support continued joint development activity with customers, for the development of the Structural InkTM programme, to provide working capital and for the scale up of production capacity, as required.


So nothing about funding bloated boardroom costs and ongoing loses then?  Why can't Applied just be honest about that?

The company will raise the cash as fund managers are always prepared to spunk other folks money without doing any proper due diligence and thus Applied will have enough to keep going for at least two more years. great news. Pay rises for the board and as N+1 Singer banks half a Bernie of commission on the fund raise it will be bonuses all round in the Square Mile too.

A company that can't generate any material revenues four years after its AIM casino listing, that lies to investors and which spunks c£400,000 of mug punter's money a month, what could possibly go wrong?

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