The shenanigans at Physiomics

The shenanigans at Physiomics

London PYC

Price 0.45P

A daily round of golf, a kick about down the park or perhaps an afternoon sailing the choppy waters in Dorset’s Poole. Why not when you’re a board member of an AIM listed company. Investors like Delve will have first hand experience of CEO’s who you think what are they doing all week! Answering to shareholders is not top of their list in fact why bother? A fat salary, pension and almost no chance of being toppled is no incentive to create value realisation and in many instances’ investors can struggle to judge workers from work shy.

In now way is Delve suggesting the board are acting in this manor however one can easily conclude they have decimated the share price. Believe it or not value destruction is relatively hard to do it takes time, a dose of good news here, a bit of bad news there and lashings of funding announcements. I want to make a point here its not always the company asking for funding, often brokers want to bookrun as they earn cash from that and can add pressure on listed businesses to raise capital. Regardless the market was informed on 10^th march of a capital raise at 0.3p a 33% discount to the share price. Whilst this kind of discount isn’t uncommon Delve believes there was no need for such and this was illustrated by 7 days later a revised placing offering only a 14% discount. Enter chatterbox Mike Whitlow a love or loathe kind of character taken to walking around Runcorn with a microphone. Delve assumes he talks in his sleep too!

Much can be said of Mr Whitlow however an activist investor he is and a good one at that. Saving investors embarrassment and shaving off 19% discount to the raise earned him praise and rightly so. Going above 3% interest in a company is not something to be taken lightly, in the era of social media notifying a holding can be grimy. Selling down a holding would need to be notified and occasionally a certain amount of abuse can be taken. Penny share enthusiasts Richard Edwards and Ian Bagnall have come on board and notified the market of there holding too.

The value of the business languishes at a mere £2m, when you have been in the market as long as Delve you would know this is worth that as a listing alone perhaps as a cash shell or in readiness for an RTO. Its this that has attracted my attention because the new TR1 holders have a wealth of insight and experience in the markets. ECR minerals ship was steadied and sailed quite sprightly with Mr Whitlow at the helm, the business was put on a steady foot and is now flourishing. Delve would like to argue in this instance that knowing more about the stock market trumps knowledge of the business itself. Having experience of life sciences does not make you a businessman. If the value of the company were much higher this argument would be defunct but at a mere £2m it would be prudent to install experienced market operators. Delve understands an executive from big pharma is willing to join the board, this we understand has been agreed should the vote go in their favour.

Physiomics has been around an age, its possible that the majority of you reading this has been in and out at some point. The per-share value destruction is around 95% presumably the directors are not proud of this but wouldn’t one want to admit defeat and leave the building quietly? It seems not, letters are being sent out to shareholders instructing them to vote against the resolutions or at least strongly recommending. It appears the directors are rattled.

On the 4^th December 25 contracts were announced for a total of £29,700, between the 10^th & 15^th 3 further contracts were announced only the latter gave a figure of £142k average. Both in Januray 26 and February further contract announcements were made with one being for £66k. These figures are not going to set the world alight and it is inconceivable that anything more than retail would want to invest in this business but it does show there is something there. One would have to conclude the directors are doing something right, are they on the cusp of turning he company around? Can they make a profit? Are they genuinely the executives to create investor value? The Company has built valuable intellectual property (IP) (Virtual Tumour and our personalised dosing tool which is in development), proprietary know-how, modelling capability, scientific credibility and customer relationships that represent important strategic assets of the business. These assets are most likely currently not being leveraged to there full potential. Its wouldn’t be far fetched to suggest a raft of new business is out there but not yet being exploited. Businessmen/women appear in many guises, they do not have to be Dr’s or indeed university students just a head for enterprise will suffice. Vision is something many listed CEO’s lack and it appears the current board lack it in bundles.

Delve is confident after 20 years + of value destruction, the hugely discounted raise and the clear instruction to investors on what to vote for answers this. Its time for experienced market operators to move in, review the business and instil confidence. There could be something special here perhaps a future market gem and Delve would like to wish Messrs Whitlow, Bagnall, Tulloch & Gouldstone well.

Pro’s

· Valuable IP

· Unexploited market potential

· New experienced market operators as directors

· New director contacts

Con’s

· Further funding probably required

· New directors with little or no experience in life sciences

Delve has a target price of 1.5p however this all depends on the proposed directors being installed.

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We hope you enjoyed reading our article. This is for information purposes and must not be used as an investment case.