- Investigation puts two-thirds of revenue in doubt
- Shares suspended as business scrambles for cash
- Sceptical analyst believes it may be end of the company
It’s been called a ‘car crash in slow motion’ but the impact has finally arrived for WANdisco (WAND:AIM) after uncovering a devastating potential fraud that has shattered management credibility.
The data migration software provider told investors that anticipated revenues for 2022 of $24 million will be nearer to $9 million, as it called for the stock exchange to suspend trading in its shares. Lord knows where it leaves its previously implied near 1,000% jump in bookings to $127 million.
SHOCKING CONTROLS FAILINGS
The finger is being pointed at one senior sales employee, yet it seems dubious that such a catastrophe could happen without serious management, reporting and governance failings that go right to the boardroom.
Over the past six months WANdisco has been shouting from the rooftops about significant revenue growth thanks to winning lots of new large contracts across the internet of things and telecoms spaces.
Only three days ago it talked about listing in the US to improve liquidity, something that many tech companies do to obtain a higher valuation.
Those plans have gone up in smoke. The idea that someone in the company has potentially been fiddling the books is a nightmare for management and shareholders.
‘To go from aspirations of a US stock market listing to having your shares suspended in less than a week is a total embarrassment,’ said Russ Mould, investment director at AJ Bell.
COMPANY’S LIFE ON THE LINE
It now leaves the company fighting for survival and investors may have to face the prospect of their shares going to zero. At the very least, talk of ‘significant going concern issues’ imply that the company is in dire need of a cash injection to stay alive, and who is going to stump up extra readies with a potential fraud investigation hanging over the business.
‘Forget a dual-listing, it may not even have a UK-listing after this,’ said Tom Kennedy, an analyst at Megabuyte, the boutique research firm that has been raising concerns about growth and cash flow for years. ‘Is this finally the end for WANdisco?’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Steven Frazer) and the editor (Daniel Coatsworth) own shares in AJ Bell.
