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ZAI scandal – the rush to sign up a new Nomad already under way….for some more than others?

By Nigel Somerville, the Deputy Sheriff of AIM | 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.

In the wake of AIM’s shocking execution of ZAI Corporate Finance last night – announced not once but three times at 6.15pm – the collection of AIM-listed to-be-former clients of that Nomad firm has been keen to get a message out to the market that the search for a replacement is already well underway.

So far today 12 companies - Polo Resources (POL), GCM Resources (GCM), Zibao Metals (ZBO), Obtala (OBT), Grand Group (GIPO), Clear Leisure (CLP), Northwest Investment Group (NWIG – the investment company with a seven year record of not investing a penny), Univision (UVEL), Alpha Returns Group (ARGP – formerly the disaster that was Digital Learning Marketplace, DLM), Ukrproduct (UKR), EQTEC (EQT) and Central Rand Gold (CRND) have already commented, with words to the effect that discussions are already underway.

Well, sort of. Some have said they are in discussions or that a search has started, although Univision tells us also that it is considering all options available to it for the interests of shareholders. Is Univision considering throwing in the AIM towel?

Obtala tells us that it has vetted several Nomads during the past weeks and is in the final stages of agreeing satisfactory terms and the Nomad in question has already been granted an expedited take-on process by AIM. So Obtala looks like its purgatory will be short lived. It also sounds as though this removal of ZAI was well flagged up to Obtala.

Central Rand Gold tells us that it is currently in discussions with a proposed replacement nominated adviser which is currently undertaking due diligence. So that’s pretty firm too.

Other variants are offered: GCM Resources tells us that it would like to reassure its shareholders that a new nominated adviser is being actively sought, a form of words also used by Polo. We’ll see what happens there.

The statement by Clear Leisure suggests that it may be unhappy with the covert execution of ZAI, telling us that its Board wishes to make it clear to shareholders that the company has not been involved in the decision of AIM in this matter. We are then told that it is commitment [sic] to act promptly, in order to maintain its listing and announce the appointment of a new Nomad as soon as practical. Perhaps they were so cross that the syntax was forgotten. Let’s hope that AIM is not so cross about the apparent insubordination that no Nomad will defy the grandmasters of the Casino.

On the other hand, Zibao Metals tells us simply that the board is in talks with potential nominated advisers and hopes to update the market shortly, a form of words also offered up by AIM-China Grand Group, fellow AIM-China and Filthy Forty play Northwest Investment Group, Filthy Forty play Alpha Returns Group, Ukrproduct, and EQTEC adds the word advanced to describe the talks.

Of course, that last group appears to include an awfully large AIM-China contingent, with two outright members of the remaining 12 or so of the Filthy Forty – Northwest and Alpha Returns – as well as Grand Group (which missed inclusion because it listed too late) and Chinese/Hong Kong non-ferrous metals trader Zibao.

Meanwhile pity poor old EQTEC, which only appointed ZAI on 19 July. The obvious answer there would be to phone up the previous incumbent (Strand Hanson) which  could presumably see though the due diligence fairly quickly. Unless there was some reason behind it stepping down, of course.

For investors in Grand Group, those with longer memories than your average Frontera Resources (FRR) investor will recall that it missed inclusion in our Filthy Forty of AIM-China plays only because it listed too late – in 2015 at 80p. But since listing it has been a downhill slide to the 10p mark at which it was suspended.

Of course, the suspension was itself a questionable outcome following Grand’s first round of investments which the auditor was unable to gain suitable evidence of when it came to signing off the 2016 Accounts – and so the investments were sold again, rendering Grand a cash-shell.

Six months on from the disposal and no investments later, the stock is already suspended,  the Chairman has walked the plank shortly after the release of interims where he was extolling the clean slate on offer,  the company has made noises about getting an alternative listing elsewhere (nothing came of that so far) and we have heard nothing of new potential investments. Now its Nomad has been slung off the Casino.

What Nomad with any sense is going to take that company on?

Indeed, one wonders about the other AIM-China and Filthy Forty plays. And then there is Univision – another Filthy Forty company - perhaps indicating in its statement that it may just throw in the towel. I’ve been fairly rude about Univision in the past, but I have to say that if you were straight up, wouldn’t you too be getting tired of the Casino?

What I can’t help is getting the feeling that the AIM authorities were not just targeting ZAI corporate finance. Was the opportunity to cull a series of companies, some of which are a running sore, a too good to miss?

The problem is that dusting it all under the carpet like this serves nobody. I daresay that some of the Filthy Forty and other AIM-China companies will prove to be perfectly sound – or at least not abject frauds. If the result is that they are all simply booted off, how do we know which were frauds and which were not?

Who cares? This is the world’s most successful growth market where there are no rules, no lines in the sand, no mis-deed to devilish and – it seems – a secret kangaroo court to kill off whoever it wishes so as to hide all the evidence.

ZAI may not have been a saintly outfit, but it is by no means the worst offender. Why is it that it can’t have its day in court? Surely the authorities would welcome the opportunity to hand down its justice in public so that we could all see that AIM Regulation is a fit and proper body and not a bunch of oxymorons?

We’ll need to wait and see what happens to ZAI’s former clients, but I strongly fancy a fair few will quietly not make it over the line, and that AIM Regulation will be quite happy to stop being reminded that forty of them were allowed on to the Casino in the first place.

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