I would like to say that after reflection and careful consideration of the facts as they now stand, I have changed my view with regard to the takeover. While I continue to believe that the state of ResApp meant that the terms of the original offer were absolutely not in theb est interests of shareholders, a great deal has changed in the meantime:
- The quarterly cash flow statements shows that the company is facing serious headwinds with ResappDx, and the existing partnerships are not translating into positive cash flow. Cash flow will be critical to ResApp going forward, and ResApp is just not showing any signs that it can generate it.
- In spite of the company’s ongoing work on the Covid-19 test they have not been able to announce any significant improvement in the prediction rate through adjusting (tweaking) the algorithm. The clear implication is that the Covid-19 test is sensitive to variants and will have to be retrained with new clinical data each time a new variant becomes dominant. Each release of the Covid-19 test is therefore likely to be short-lived and there will be limited opportunity to recover the costs of obtaining fresh clinical training data.
- If there are resignations of key personnel at the company following rejection of the takeover there will be a serious loss of momentum that is likely to impact the company’s ability to move commercial negotiations forward. Research and development could also be impacted.
- My research shows that a new cornerstone investor is unlikely to emerge in the days following the vote. ResApp is not a startup and is therefore of no interest to companies or investors who specialise in such things, and it is not yet a commercial operation and is therefore of no interest to investors who are looking for those kinds of opportunities.
- The share register is now substantially altered from what it was when the takeover was announced. Much has been made here of the influx of institutional funds who have taken positions based on the financial aspects of the takeover and the board’s support, which would lead them to expect the deal to proceed. But over the same period many retail investors have sold their ResApp holdings. The register is now comprised predominantly of “arbitrage” traders, several thousand smallholders for whom the only meaningful exit strategy is the takeover,and we “visionary” holders. I no longer feel that rejecting the takeover is in the best interests of any of these groups. The arbitrage traders will lose their margin and probably be forced to exit at a loss if the takeover fails. The small holders will be left with holdings too small to divest profitably. And realistically,Res App is probably no longer capable of delivering the vision we all held.
Given these conclusions, I believe it would be irresponsible of me to send the letter to shareholders as originally planned.
I know that many of you have characterised my role as “leadership”, but I would like to categorically deny that this is an accurate portrayal of my role here. Those of you who follow my posts on other stocks will know that I strive to be fair and balanced, accurate when stating facts,and justifiable when stating opinions. I do not believe there is any single shareholder here who decided to vote against the takeover as a result of my posts. I do not believe there is any single shareholder here who holds their position out of loyalty to me. I am absolutely not and have never been an “activist” shareholder.
But sending this letter would change this situation. I would be speaking to holders who may not have followed recent developments closely relating to ResApp, who many not understand the current circumstances very well,and I would be trying to convince them to take a position against the takeover. That absolutely would place me in a position of“leadership” and therefore of possibly being responsible for them acting against their own best interests.
I understand that many of you will be disappointed just as I am that the hopes we held for ResApp will not be fulfilled. But I believe that hope and disappointment have led us to refuse for too long to see what has become of ResApp. I encourage all of you to put your emotions aside and recognise reality.
To all those who have contributed to the fundraising campaign and provided an email address, I will be in touch to return your funds. Those who donated anonymously can send me the date, time and amount of your donation and if I can verify your donation I will return your money as well.
With sadness and regret I bid adieu to ResApp.
