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Reason to sell MySQUAR No. 135: Shocking trading update - pre-placing lies ramp all too clear

By Cynical Bear | Wednesday 11 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.


The reason for the deafening silence emanating from uber-dog MySQUAR (MYSQ) became all too clear this morning as it issued a shocking trading announcement which makes clear that revenue has fallen off a cliff. Surely something should have been mentioned at the time of the placing in late-July?

I’ll assume most of you know the background of this Myanmar social gaming and payments play that has been covered on a number of occasions HERE but I want to take you back to the excitement of the first half of the year when MySQUAR started updating the market on its game launches and revenue numbers on an astonishingly frequent basis. Let’s take a look.

The MyCombo launch took place in February followed by the Lucky Wingbar casual gaming platform in March which helped get a £2 million placing away in April at 0.85p but the real excitement, and the share price growth, then came with the various forthcoming revenue numbers.

On 9 May there was a Significant Revenue Milestone announcement stating that in the first week of May, daily revenue had increased to $5,000. On 6 June, it was stated that this had increased at the start of June to $7,000 and then at the start of July, it stated that it had reached “run rate operating breakeven” (a clearly nonsense phrase that I critiqued HERE) with revenues reaching $8,500.

Investors could hardly contain themselves and lapped up a further placing at the end of July raising a further £1.2 million at 3.75p, although the business claimed that it didn’t need funds for operating purposes.

Really?

Today’s announcement states that the average revenues for July to September were $135,000 a month. I note that it hasn’t used its normal metric of daily revenues but I calculate that to be a mere $4,400!

So daily revenues were at $8,500 at the start of July and yet the average for the last three months was almost half that. Shouldn’t MySQUAR have put out an announcement before now that it is no longer operating at break-even?

What I really want to know is what the situation was at the time of the placing on 31 July. In that placing announcement, MySQUAR stated that it did not need the funds for operating purposes but that must have been a lie as it must have known by then that revenues were plummeting and it only had $700,000 at the end of June anyway (having raised £2 million in April). How did SP Angel, the Nomad, sign off on that RNS as it must have been patent nonsense?

I would advise anyone who put money into that placing at 3.75p and are now sitting on a significant loss, as it is down 20% (so far) at 3.225p, to have a word with their broker / the company / SP Angel / the FCA and ask for their money back.

There is just no reason to invest in companies that operate like this although plenty of reasons not to and I have another reason coming up later today.


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