The time in invest in microcaps is Over - buying and selling within short periods of time to take advantage of oversold or overbought position is speculative trading and not to be confused with investing ( I wish you luck on this because thats no different than throwing a dart and hoping to get your timing right).
In the current environment, microcaps ,despite any potential they may have, generally have (1) weak balance sheet , (2) poor business traction (especially those that have changed business models recently) , (3) poor corporate governance (running the business as if the public investor is non-existent) and subject to great price volatility due to (4) poor liquidity and to top it all, they run a (5) great risk of getting de-listed or running into administration as their time runs out. In the wake of this market crash and the ongoing virus pandemic, the risk reward is poor to be in microcaps and therefore best avoided.
This is in contrast to the tech boom we had in second half of 2017 to Feb 2018 when it ended- it was when microcaps stood out and gave phenomenal returns.
The times have changed and so must we , and Animoca is an example of where microcaps can go wrong.
And you should know too that out of the universe of microcaps, only a handful (you can count with your fingers) that ever became an Appen, Promedicus and Polynovo. And unless you can appreciate IP and can see the IP of the company being validated, chances are the company you are investing in is just selling you a dream and buying as much time as they can to get you to throw money at them (while they pay themselves enormous compensation and performance shares).
Finally my rule on microcaps- any microcaps with no revenue and has a market cap in excess of $25m (sp x no of shares) is expensive , unless you are confident that its IP is first in breed (novel , only one in the world with first mover advantage and strong differentiation ) and can offer a valued proposition that can address/resolve/improve a much needed societal issue (business, health etc). Of course a holder of such stock will always say their company has a superior technology - a superior technology like a robotic builder (FBR) is one thing but the technology must present itself at the right time that society demands and need. So Polynovo's BTM technology to improve burn reconstruction surgery comes in at the right time when surgeons demand a better approach , but robotic builder is not as unions do not want to shed their workers and labourer wages are not yet sufficiently high to warrant an unorthodox approach.
Blockchain gamer Animoca Brands (AB1) has been delisted from the ASX
The exchange says governance, personnel and non-compliance issues were behind the decision to remove the company
On top of this, the ASX says Animoca has struggled to comply with 12 listing rules since January last year
In an effort to prevent the delisting, Animoca lodged a 39-page report with the ASX in February
This, however, was not enough; the ASX told the game developer last Friday it would be removed on Monday
Now, Animoca says it is open to exploring an initial public offering on another exchange
Shares in AB1 were suspended in September when Animoca failed to produce its half-year report by the due date with stock last trading for 18 cents apiece
Shares in Animoca Brands (AB1) can no longer be traded on the ASX after the blockchain gamer was removed from the exchange yesterday.
In an announcement to market today, the ASX claimed AB1 had been non-compliant with an array of listing rules since January last year. Most notably, these included not maintaining continuous disclosure and failing to provide the exchange with compliant reporting documentation.
"ASX considers that AB1 lacks adequate resources, systems and controls to comply with its obligations under the Listing Rules," the announcement read.
"While ASX acknowledges that AB1 has recently taken on some additional staff to boost its compliance resources, ASX is not satisfied that these measures will be sufficient to achieve the level of compliance ASX reasonably expects of a listed entity," it continued.
Animoca says it did all it could to fight the delisting, claiming it presented a "thorough and detailed case".
"It wasn't really a case of negotiating, it was more about saying 'here are the resources we've attached, let us know if you think they're good enough.' And unfortunately, it wasn't," Animoca Brands co-founder and chairman, Yat Siu, told The Market Herald.
"We have put structures in place. We have hired more people — very senior people — as well as brought on further strong legal support to help us with all of this," Yat continued.
"What I can say is we have tried our very best." The ASX warning
Issues with Animoca's governance were first flagged by the ASX back in December 2019.
The exchange called into question Animoca's involvement with cryptocurrency activities and use of simple agreements for future equity (SAFEs) in its subsidiaries. On top of this, the ASX says Animoca has struggled to comply with 12 listing rules since January last year.
All of this was detailed in a letter from the ASX, released on Christmas Eve. The announcement stated Animoca must submit a response detailing why it should not be removed or else face delisting on February 21.
That deadline was extended, however, when Animoca began to deal with the fallout from the Covid-19 outbreak. The company said it had been forced to pare back staffing and adjust office hours to minimise employee exposure, and, as a result, needed more time to prepare its case.
"Although the company is, generally, well able to conduct its operations on a remote basis, the arrangements have resulted in a slow-down of some activities, particularly work that requires face-to-face meetings, access to physical records or hardware, some communications with key advisers, and other forms of physical presence," Animoca's announcement read.
As a result, the ASX gave Animoca an extra fortnight to submit their case by March 6, and while the blockchain developer did lodge a 39-page response with the ASX before the new due date, it wasn't enough to save them from delisting. New opportunities ahead
Despite today's news, Animoca is positive this isn't the end. Co-founder and chairman Yat Siu told The Market Herald the company ultimately wished to remain publicly-traded.
"We do wish to stay public, maybe in another environment ... we think moving to an exchange which is more nurturing to our business in the mid to long term is the right thing," Yat explained.
In another letter to stakeholders, AB1 reaffirmed this sentiment and confirmed it's now seeking other listing opportunities.
"We intend to pursue an initial public offering on another exchange as soon as practicable. Owing to the hostility displayed by the ASX toward our blockchain-related activities, we have for some time been working towards listing on another exchange," the company directors explained.
The news might come as somewhat of a relief to shareholders, whose stock in AB1 has been locked up since early September. The ASX first imposed the suspension when Animoca failed to lodge its half-year report on time. Since then, shares have remained in the grey as the ASX continued to examine the company's interim report.
Shares in the blockchain gamer last traded for 18 cents apiece, but only time will tell if the stock will soar on another exchange.
