Yes, this is weighing on the market. But so too are matters concerning how, and in what manner information is being disclosed to the market (ie: selective disclosure). Cash management is also an issue, as I have argued since last week, and no-one to date has either disputed, or refuted.
The convertible note approach you have suggested tends to be Kerry Packer's favoured investment measure. It is also the favoured investment instrument of the people I work with, and recently, it was put to good use by HTA.
Such an approach, combined with a performance rights instrument could work.
This might be akin to what has been used by TMS in bedding down the OB /studio production deals with NINE and TEN. Additional shares were alloted based upon the achievement of specified performance hurdles (ie: value, profit, EBIT, etc).
What, however, the market is lacking with ATC is consistent, accurate information which shows what progress has been made to date in closing on FNT. So far, the market has been treated to 2 highly advanced releases, suggesting "imminent closure" of the FNT deal, only to now have the matter deferred for an undefined period of time.
In my view, the market does not doubt the possibilities of the ATC model in due course. It is, however, entitled to be skeptical in those circumstances where only 1/2 the information has been provided.
Take, for example, the selective disclosure of progressive revenue results, sprinkled with detail regarding $x collected /billed on such and such a day. This, in anyone's language, is quite cheeky, particularly in those circumstances where the figures involved have tended to either contradict, or fall short of, earlier stated forecasts.
As we all know, the market does not like surprises. But ATC has, in recent times been delivering surprises, albeit through a carefully crafted, built-up series of expectations.
It would, however, have been better for ATC to treat the market with respect, and maturity, and to have provided the market with sufficient detail (good or bad) so that the market could then have properly assessed ATC's progress in: 1) growing its business; 2) connecting customers; 3) converting revenue to cash; and 4) closing on FNT.
As for TLO, the comparisons were not about ATC adopting a TLO business model. Rather, it was about the similarities by which: 1) information disclosure was managed (selectively); 2) messages were released which painted upside without explaining the detail, or ignoring the flipside (ie: what had been said before, etc).
My concern, therefore, is with ATC adopting a highly selective information disclosure approach which, in the way in which information has been disclosed to date, potentially distorts ATC's market position (or the market's perception of that position).
Take, for example, the Q1 revenue forecast. If, as the ASX release of 7/10 suggests, ATC was adversely impacted by the underseas earthquake, why did it not keep the market informed of this development, particularly as the Q1 revenue miss was >25% (again forecast)?
Why did ATC wait until 7/10 to make this disclosure?
The same could be said for the FNT transaction.
In addition to this, no-one has yet offered up an explanation regarding ATC's revenue to cash position, and the reasons why ~70% of its Q1 revenue was outstanding at 30/9.
If ATC's cash position is declining, and its ability to collect in receivables is slower than otherwise anticipated, ATC's business is at risk of a cashflow crisis. This, after all, was the point of my original posting last week which started off this entire debate.
ATC Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
