CBUY – Cloudbuy – resumes listing

CBUY (Cloudbuy) is “a United Kingdom-based provider of an integrated software platform for e-Procurement and e-Commerce for the trading of goods and services between purchasers, such as public sector bodies and their suppliers, along with the analysis and coding of spend and product data.”

I had only been vaguely aware of it, although I undoubtedly suspected it to be total junk. Paul Scott noted in his report on 11-Sep-2015 (http://is.gd/Ns0Slw) that its listing had been suspended due to the resignation of its Nomad. His verdict:

This company doesn’t really deserve to survive – it’s had long enough to make its business model work, and has squandered so much shareholder cash, that perhaps it would be better if it’s put out of its misery? So management probably have one last chance to make their impressive-sounding, but commercially poor business model actually work, in the next few months.

It resumed its listing today, closing down 27.7% to 13.55p as at the time of writing. Ouch.

The company issued a couple of other RNS’s today. One was an announcement (http://is.gd/HSIA3N) that:

Ronald Duncan, Chairman of cloudBuy, has terminated and settled with immediate effect, the share sale and repurchase agreement (the “Repurchase Agreement”) first announced on 27 October 2014, between Equities First Holding LLC (“EFH”), himself and the Company.

Accordingly Mr. Duncan is no longer interested in the 2,250,000 ordinary shares that were transferred to EFH pursuant to the Repurchase Agreement announced on 12 November 2014.

As soon as I read “Equities First Holding”, I realised that this company was doomed with a very high degree of confidence. A sale and repurchase agreements like this is a form of “equity death spiral”, which, as you can imagine, does not end well.

There was also an announcement (http://is.gd/obVHu1) of a director purchase:

Ronald Duncan, Chairman of cloudBuy, has purchased 50,000 shares of 1 pence each in the Company at 15.4 pence per share for the benefit of his SIPP.

So, that is a purchase of less than £8k. No doubt this is an attempt to send a bullish signal to the market. Contrary to this, I interpret such a small purchase as an extremely bearish sign.

I also note that there is an RNS issued on 09-Sep-2015 (http://is.gd/YZl7tv):

the release of its half year results for the period ended 30 June 2015 has been delayed

This is another bearish signal. Companies with great results generally do not delay their accounts.

After having made only a cursory glance at this company, it is absolutely clear that it is, and was, completely uninvestable, and that shareholders were likely to have had plenty of warning signs and been able to get out in plenty of time.

There are so many other warning flags about the poor quality of this company. It is listed on AIM. Also, look at the cashflow statements, as presented on Stockopedia. The company has only reported cash outflows from its operating activities, and it issued a fair amount of equity. You can also look at the discussion threads on Stockopedia. Paul Scott, or others, may have reported on it, and provided valuable warning. Here’s what he said on 30-Mar-2015, months before the company was suspended:

based on performance so far, I can’t see any evidence at all that there is a viable business here

I think there is great value in looking through very poor companies. You will spot a lot of danger signals, and it will temper any bullish rationalisations one has.

If I had shares in this company, I would sell now, and take any price offered to me.

My verdict: dead man walking. This will go lower. Let me see in 6 months time.


Update 07-Oct-2015: Some posters are speculating on ADVFN that CBUY will have a placing at about 5p. I’m guessing that even this will be a hard sell, and likely to be unfeasible. The “sale and repurchase” agreements set up by the directors are basically “sale and NO repurchase” agreements. Effectively, directors are bailing out on this company. It seems like an act of desparation. If the company were truly considered viable and undervalued (why would they sell if it was undervalued?), they could perhaps negotiate a private placing of their own shares with an institution. The EFH deal, is, in my opinion, the company’s death warrant, and it’s difficult to see the instis getting involved in any placement. This is all purely my speculation of course, and I am interested to see how this will all play out.

About mcturra2000

Computer programmer living in Scotland.
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