The company has been mismanaged in several ways, which date back many years:
- Whilst listed, Animoca was on the ASX's "watchlist" following a succession of governance and reporting issues ... reinstating accounts, forced to recommence providing quarterly cash flow reports, leaking of price sensitive info ...
- ASX delisted them after they failed to heed their warnings
- Animoca 3 years without lodging accounts (despite 6+ months working with new auditors)
- ASIC convicted and fined them, which is the start of a process, rather than the end
With this track-record, the risk of being deregistered is significantly higher than close to zero. More importantly, in my view, is the reputational damage.
Delisting was a massive hit to Animoca's reputation. Whilst I put the blame firmly with the board/management, I also admire the same leadership team for what they've achieved. They've innovated and executed at great speed, and they've failed fast in terms of blockchain game development as they strive to get product market fit. Savvy business operators (particularly in terms of acquisitions, partnerships/JVs and self-promotion), but terrible public company operators (particularly in terms of governance, transparency, reporting and keeping shareholders informed).
There's some glaringly obvious skill gaps. An independent and credible board is essential. Just compare Animoca's third-rate NEDs with Yuga's board appointments.
Yat conceded at the GM that the reputational damage had made it difficult to recruit top talent amongst other things. The ASIC reprisals are another set-back. Nothing terminal in my view, but it's another red flag and negatively impacts the company's valuation.
Risk increases the longer the company is unable to lodge the financials as it gives more credence to the possibility of some serious issues. Their excuses have always been lame, such as blaming Covid for multi-year delays, but to claim that they were unaware of the court proceedings is ridiculous. They are now wasting time, energy and money on legal counsel when this should've all been sorted a long time ago. They've clearly not learnt from the ASX delisting and conveniently failed to explain to shareholders why the accounts weren't submitted prior to the April 2022 deadline after assurances were given at the AGM.
Regardless of Animoca's price performance during 2021, reputation matters as it influences recruitment, partners/stakeholders and investor sentiment. It's one thing raising money during a bull market (when all blockchain companies were multibaggers), but much harder to raise funds at a higher or even flat valuation during a bear market.
Anyway, things could be a lot worse. Plenty of crypto degen companies are going to the wall, especially in the DeFi space. Unicorns backed by well-known institutions and VCs that had inflated 100x during the past 12-18 months are now worthless.
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