Should HML investors be wary?

Here are my thoughts on HML:

-FACT ONE: We do not know what ASIC's specific concerns are, although they are serious enough to warrant ASIC issuing the letter + HML voluntary suspension

-FACT TWO: ASIC's concerns were not able to be addressed, by themselves, by issuing a replacement prospectus for the options. The situation was so serious that HML was forced to attend an administrative hearing with ASIC. A hearing with ASIC is very rare, as usually these issues are solved through backchannels and a reissue of prospectus.

-OPINION ONE: ASIC, like a lot of people who read the financial accounts of HML, cannot reconcile how HML management have conjured up their NTA figures. It would appear that HML revalues the valuation of its investments in private companies following related party transactions. These related party transactions have the affect of artificially increasing HML's reported NTA.

-EXAMPLE ONE: Bartholomew Roberts Ltd ("BRL")
-23 January 2017: HML announces a $1.2m investment for a 36% stake (implied enterprise valuation of $3.3m)
-Sometime between 23 January 2017 - 26 May 2017 an additional $3.0m was invested by into BRL at an implied enterprise valuation of $93m. We know that this 'capital raising' was just a further injection of capital by HML because HML's investment carried at cost is $4.2m. All of this is disclosed in HML's please explain to ASX on 26 May 2017.
-During this same time period HML management decides to revalue their investment from $4.3m (cost) to $14.1m (based on a $93m EV)
-There is no external party involved in any of these transactions or revaluations. The one common denominator is Stuart McAuliffe and his web of pirate companies.

-EXAMPLE TWO: JB Financial Group
-12 December 2016: HML announces a $6.25m investment in JB Financial Group for a 12.8% stake (35.5% non-diluted) at an implied enterprise value of $48.8m. (further details of the investment were announced on 28 February 2017)
-HML announced at the time the stated intention was to list JB Financial Group on ASX in 2017 at a
multiple of 14.9x forecast NPAT of $5.6m ($83.1m)
-At some point between 12 December 2016 – 26 May 2017 HML’s investment was revalued from $6.3m (cost) to $29.6m. Although not stated, it is clear that management used the following assumptions in order to revalue the investment:
-Changed the valuation method from a fully diluted basis (12.8% equity) to a non-diluted basis (35.5% equity)
-Revalued the implied EV from $48.8m to $83.1m (which happens to be identical to management’s estimate, based on management's forecast, of what valuation an IPO ‘might’ achieve)
-PROOF: 35.5% * 83.1 = $29.6m


-OPINION TWO: These kinds of fuzzy, related party accounting and questionable valuation assumptions do not pass the sniff test. It certainly would not pass an auditor's sniff test. HML realised they would have serious trouble getting an auditor to sign off on their full year 30 June NTA figure so HML needed some way to crystallize the value in their portfolio. Management did this by announcing a related party transaction whereby another of Stuart McAuliffe controlled companies would buy JB Financial Group for cash.

This transaction will be funded through new equity raisings in JBL, with the benefits of this raising being existing HML shareholders (who were told by HML management they would receive a special dividend).

-FACT THREE: Raising money from new investors to satisfy the investment criteria and income of existing investors is a Ponzi scheme.

You can do your own research to determine if you think any or all of this applies to the pirate web of companies.

Let's have a robust discussion on the accounting arguments I've raised. I won't respond to flaming.