Negative Equity. Put $1 in, get Minus $1.1 in return? Sell me this pen.

This is akin to kicking a dog while it is down. Unfortunately, the markets don’t care about emotions. Returns are returns, and money will flow as such.

Healius isin such a predicament. Without a moat + with dilutive margins, disrupted businessmodel and crippling debts, no wonder it falls into the negative equityvaluation of today. Would you buy into an asset putting $1 in for every Negative$1 you automatically get? And worse, the likelihood of it going into even morenegative territory of more!? No one in their right mind would.

Hence why,we rate this as a short. We recently called out Sigma as a short which we builtup a position from the $1.30’s and look where it’s at. We see Healius as no differentin the earlier stages of our position. We anticipate a move below $1.10 in thenear-term given no economic moat, increased competition and a crippling balancesheet of debt that brings the group’s net equity exclusive of goodwill tonegative Enterprise Value meaning the group is worth nothing compared to itscurrent value of ~$1bn market capitalization. A moved below $1.10 is imminentand we accept the market realities as such.

In linewith the reputable investment banks of the street, we unfortunately valueHealius a going concern that will be dismantled and ultimately acquired giventheir past history of mismanagement and poor shareholder returns.