hi drbrooks
I will try and do your questions justice by first stating that I dont consider myself an expert by any means, I am and expect always will be a student of this craft. However in relative terms I have been trading for about 3 decades and have picked up a few parcels of wisdom along the way.
Firstly IAM was a well hyped up stock even before the RTO, many hearts were keeping the excitement at a fever pitch for many many months, those that got in under and around 1c could have effectively 10 bagged. Those that got it just before or soon after relisting could have easily 4-5 bagged. The prospectus had several red flags which were rationalised and ignored, largely because of the story that was woven around the NPAT milestones, and the crafty number spinning many were engaged in predicting a SP of something like 8c on cumulative NPAT of $1 million and 16c on cumulative NPAT of $4 million (from memory somewhere around there) and so on
M3 was cumulative NPAT of $11 million and
M4 was cumulative NPAT of $40 million
Add the short time frame the company gave being end Jun 2019 to achieve all 4 milestones to receive all 4 sets of performance shares, the story was given merit and credibility by the enormous amount of effort and hard work the board would obviously do to ensure these milestones were achieved, else how would they be rewarded.
The story also looked promising as the collective group of businesses that would merge under the umbrella of IAM had already made an annual revenue of $650,000 in 2015, the assumption being the business was well under way and adding fuel to the fire, they didn't need to market because they had at the time a huge backlog of big ticket clients wanting to get on-board. Success was implied as inevitable.
I should clarify at this point that I have no issue with any of this, at any stage, for me its simply a matter of risk/reward and I will get to more detail on this shortly. The main ref flag was the loss in 2015, just over $900,000 (so revenue of $650K and expenditure of $1.55 million). Its important to keep in mind therefore that as a collective group of private businesses that would come under the IAM umbrella they were non-viable, the RTO and prospectus is in essence at the spec end a bailout in exchange for a story of future growth. If one is to be pragmatic this is simply common sense.
Finally IAM opened under its new ticker and traded sideways for a few months, but its story was still intact, and after a few more announcements (albeit light on detail) and a high profile figure in the form of Mark Rantall joining the board, fomo finally set in and mid Dec 2016 the SP soared to its ATH of 9.5c
Profit taking over the holidays followed and the SP traded sideways mostly between 6c and 7c till the end of Feb 2017, when a rush to keep a promise of a second MOU by end of Feb 2017, resulted in the now much debated NAB mess (this for me was red flag number 2) and this is also when the story started to derail.
At this point I will clarify how I look at spec stocks in general. Firstly they must have a story, as they almost never have anywhere near break even revenue so they must have a good story, and how good a story they have usually decides how long they can carry a large EV before the market demands numbers. Thats how simple I try and keep it, story and numbers. IAM was in the story phase up until the ASX please explain following the NAB MOU. Tens of millions of dollars exited on the 2 trading days between the NAB MOU and the ASX please explain. By this stage they have also released 2 quarterlies that show dismal revenue despite the overwhelming demand, but this is glossed over as delays in on-boarding and give the company a break they have barely got going (small red flag, but I certainly wouldn't bail on this)
As other examples of stories and how they can carry a company EV include for example RFN, massive EV but SP decimated recently by poor US trial execution, story derailed so SP tanked. PLS massive pump on story to around 80c (im guessing here as Im tired) then long period of profit taking and SP decline on delays, but story remained intact so SP stabilised and recently story got back on track, plus huge derisking with project approval and finance and buyers came back. BRN $150 million EV currently on almost no revenue because its AI story (although evolved) is still intact, at 1 point EV was over $500 million. Tesla, losing a fortune but noone cares about the numbers, the story is Elon Musk is god and the SP just keeps rising
Then 1 month after the NAB mess, Mark Rantal leaves (huge red flag) Only weeks earlier the bulls called his position on the board a crucial factor in the inevitable success of IAM with his corporate connections, after resigning the same posters rationalise it saying his job is done and hes not needed anymore and hes not important In amongst all this add the IAM long term holders site and the social media posts with grinning directors and podcast after podcast declaring everything is on track (another red flag)
SP kept declining as the story had deviated considerably from the prospectus, but it found some support and traded sideways in the 3c to 4c range for some time as the bulls knuckled down and along with the podcasts wove a new story that the deviation was not a derailing but in effect an adaptation of the company to market forces and infact all milestones were still on track, with M1 on track for 2017 (but maybe Q1 2018)
However this claim just doesnt add up. Remember that in 2015 IAM group of companies claimed revenue of $650K and expenditure of $1.55 million with a loss of $900K. With the recent 4E showed annual revenue of $488K and a loss of around $2 million. This does not paint a picture of a company 12 months on that is going in the right direction and has clients lined up waiting to get on board, so the SP collapsed to pre-RTO prices.
I have no issue with any of this, I just look at it with as little emotion as I can and try to be pragmatic, there is simply no reason at present I can see to invest here, but there is still hope and I continue to watch. There is no specific price I would buy at, IAM now needs to backup its claim of milestones being on track with numbers in the next 2 quarterlies that support its claim, for me to consider a buy, or to make an announcement of such significance that make IAM once again a compelling candidate for speculation.
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