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After the ouzo, what now for Tern? And what about InVMA?

By Nigel Somerville, the Deputy Sheriff of AIM | Sunday 5 August 2018

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.

It seems as though AIM-listed Tern has been found out – and not for the first time. Having had my traditional ouzo, the question is what happens next. And while we are at it, what about its investments into InVMA?

When it first joined the Casino I outed it on a number of points and forced out corrections after it became clear it wasn’t telling the truth about its ownership of Cryptosoft (now Device Authority) and a shambles over share issues.

Then there was the publication which apparently put a value of $75 million on Cryptosoft (now Device Authority) which was out by a factor of 1000 (I still wonder how that “error” happened) and in the face of the resulting rampant share price Tern did a placing. It was a disgusting affair and when the $75 million error came to light (thanks to THIS) the shares duly collapsed.

Then we had the Peterhouse Warrant which was exercised for apparently the wrong number of shares at the wrong price. The company apologised for not mentioning an alternative exercise mechanism. Er…right, so it misled the market.

One might have wondered how much of this any Nomad with an ounce of common decency would have tolerated before resigning – especially in the light of two directors’ involvement in the shambles are serial rule breaches at DLM (DLM). But we are talking about WH Ireland as Nomad…..

Now we have had the “clarification” which leaves the company wide open to the question of whether it committed securities fraud in conducting the placing at 26p.  At the very least it stinks and surely suggests more breaches of AIM Rules.

Meanwhile, will WH Ireland be getting a call from AIM Regulation regarding THIS? That could be a spot of hassle for it and I just start to wonder whether the Nomad might come to the conclusion that WH Ireland decides it simply isn’t worth the hassle of representing Tern any longer. That, of course, would be a disaster for the company – especially if the Oxymorons decide to force an execution by making it impossible for any prospective new Nomad to take up the post.

So with all the questions over trading at Device Authority (or lack of it), let’s just throw another grenade at Tern. This is regarding its investments into InVMA. We have been told of further investments since the initial £250,000 invested last September. The problem is that since last June there has only been one share issue (see HERE for the Companies House filing dated 5th October for a share issue on 22 September 2017). That shows 1 million A Preference Shares of 0.1p issued at 0.1p (so £1,000) with zero marked as unpaid and no non-cash payment.

Now clearly £1,000 does not equal £250,000. But Tern tells us it put in a further £125,000 in December (see HERE), a further £125,000 in January (see HERE), £125,000 in April (see HERE) and  £375,000 in July (see HERE). Yet the confirmation statement of InVMA dated 28 June 2018 re-confirms Tern’s ownership of 1 million A Preference Shares.

Am I the only one who thinks the numbers here don’t add up? I’m sure there is a perfectly sensible explanation, and I have no doubt that Tern will want to share it with us all in an RNS next week.

Meanwhile, in the absence of a clarification of what is going on at Device Authority – such as its FY17 numbers and a trading update for H1 2018 – Tern’s stock looks completely uninvestable. What a good job it has just topped up its coffers with £2.9 million at 26p! Unless, of course, a few people decide they want their money back. So you can’t even say it is financially secure until Christmas!

One might also wonder whether the moves against Cantor Fitzgerald in relation to the African Potash fraud might be copied here against WH Ireland. It never rains when it pours, eh?

Whatever else, I doubt anyone will want to put up any fresh cash into a Tern placing and that means when it runs out of (other people’s) money once again, as it surely will, it will be back to the death spiral providers. And we know what happened last time…..

With NAV at around 5p (plus a bit for the placing at a premium to NAV, less plc costs since FY17), it seems to me that the shares still, at 15.375p and well down from my sell call at 43p, have a long way to decline. And I doubt it will stop at 5p – because the management surely warrants a discount to NAV, and a big one at that.

Indeed, even if it can cobble together some good news, I would suggest that nobody will believe the company. So there are stacks of reasons for the shares to fal further and no reason I can see to push them upwards.

Or it could simply get suspended if WH Ireland has had enough.

It all makes a bit of a mockery of the FCA’s line that the past is no guide to the future!


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