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I sense that shareholders in AIM listed management lifestyle, oops meant to say oilfield services company, Vialogy (LSE:VIY) are not exactly my biggest fans. I warned them to bale at 2.125p in the autumn on the basis that the company was ramping its shares with spurious announcements ahead of a rescue fund raise. I warned them to sell again at 1.625p in early February when, lo and behold, there was a rescue fund raise and I warn them at 1.3p to sell again now.
That original article contains the full details of grotesque management pay packages over many years and of half a decade of abject non delivery. If you are squeamish do not read the article but by way of background to what has gone on here you should brace yourself and click HERE
And now for the observations:
1. In the 18 weeks leading up to the fund raise Vialogy issued no fewer than 8 upbeat news announcements via the RNS system. It was all good news. In the six weeks since the fund raise it has not said a dickey bird. One release every two and a bit weeks has become radio silence. Many of the news releases leading up to the placing were spurious non-news announcements. There was no obligation to issue them Vialogy just did so to try to drive the price higher. If you bought in the market at 2p or perhaps 2.5p on the back of those announcements how do you feel right now? Does the word “used” spring to mind?
2. The company raised a net £1.33 million from the placing. Without those funds, cash net of trade payables would have been more or less zippo by now. The company burned £1.2 million of cash in the last issued results statement. The odds are that cashburn is not much different now. As such that old clock is ticking once again. Tick Tock Tick Tock. By the end of the summer Vialogy is going to have to raise cash yet again. Last year, final results came out on June 29th. And so unless it is almost certain that results for this year ending soon will come out at about the same time with the auditors being forced to note that with just a couple of months cash left Vialogy needs to issue fresh equity in order to be a going concern. Against such a backdrop the next fund raise is going to be ugly and mega dilutive. I am not sure why anyone would put money in at all but there goes.
3. The warrants that came with the placing shares came with a 1.25p strike price. Given that the spread is 1.25p-1.35p but that the market is quite thin, there is not a cat in hell’s chance of large scale warrant exercises. So do not expect rescue funding there.
4. I remind you that the chairman of this company is a proven liar
Vialogy is still, at 1.3p, capitalised at £13.5 million. That cannot in any way be justified by the quality of management, historic delivery or any plausible estimate of future revenues. For that reason and taking into account my observations above the stance remains sell. Target price 0.1p by August.
Tom Winnifrith writes for 10 US and UK websites. You can follow his no-holds barred thoughts on twitter @tomwinnifrith or by links on his own website www.TomWinnifrith.com
The premium website where all the best thoughts of Tom appear first is the Nifty Fifty. It is co-produced with infamous bear raider Lucian Miers and with Steve Moore, Tom’s collaborator at t1ps for many years. You can access the Nifty Fifty HERE
