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VINDICATION: Telit – FCA enquiry widened, implication is of wholesale securities fraud re 2017 placing

By Tom Winnifrith, The Sheriff of AIM | Tuesday 18 December 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.

The fraud that is Telit (TCM) continues to unravel. We already knew that ex FD and CEO Yosi fait was being investigated for selling all his shares in early July 2017 while he was aware of damaging price sensitive information ( a profits warning) – that would be insider dealing. We know that founder, former CEO and the man who is still running Telit via puppet directors, Uzi Katz, is being investigated for not admitting that he was a fraudster and fugitive from justice.  Now it gets bigger.

Telit today fesses up that the FCA is now looking at “the accuracy of earlier announcements by Telit, including its trading update of 25 April 2017 and with regard to the placing, which was announced on 4 May 2017 and completed on 5 May 2017.”

I am surprised we have not got to this point earlier.  I feel utterly vindicated ( again) in that I have flagged up numerous times that it is, in my view, inconceivable that trading was incredibly strong up to 25 April (the statement) and had not changed at the time of the placement (5 May) yet the company served up way below forecast results for the six months to 30 June 2017. You will remember that the mortgage fraudster Katz sold millions of pounds worth of shares on May 24. If the placing is found to have been done on a false prospectus in terms of underlying trading then Uzi is also an insider dealer. His rap sheet grows by the day.

Telit insists in its statement today  that “The Board of directors of Telit has changed entirely since the events in question.” Of course Telit also insisted that it had taken legal advice and found that Yosi Fait was not an insider dealer. 

Whatever. One hopes that the FCA slams both Katz and Fait and ensures that their personal profits from share sales are retrieved as well as pushing for custodial sentences. But given that Katz is still pulling all the strings at Telit it seems inconceivable that the company will escape without a heavy fine and public sanction. For a company guzzling cash and drowning in debt and reliant on a disposal of a deteriorating asset to a small Chinese company with no cash to avoid a bailout placement, this is an unwelcome distraction.

Moreover, if the Chinese disposal falls through or is materially re-priced, could Nomad and broker FinnCap (FCAP) really undertake any placing with this FCA cliud hanging over Telit? I appreciate that FinnCrap is morally bankrupt but even smug Sam Smith’s company will draw certain lines in the sand. And if there is no disposal or no placing then this will be a zero.

Of course a Nomad and broker that was not desperate for any income to help support its own ludicrous IPO valuation would have resigned this account eons ago. But maybe Ms Smith et al have no shame.

At 114p-115.8p, keep selling.

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