Getswift Ltd (ASX:GSW) shareholders were set to dump their shares this morning with Comsec showing an indicative price of $2.20, down about 24%. Personally, I would not have been surprised to see it trade much lower, since the company still has a market capitalisation of over $100 million at a share price of 60 cents.
However, Getswift shareholders are stuck holding their shares right now, even if they wanted to take the money and run. That’s because the shares are in trading halt, “in relation to articles published in the AFR and pending the company’s response.”
To fill you in, the Australian Financial Review questioned some of the vague announcements on which the prior valuation was seemingly based.
At the heart of the article were some startling facts. The AFR compared past company statements to responses from purported GetSwift customers:
First, Getswift said that “Commonwealth Bank of Australia has partnered with GetSwift to offer retail merchants the ability to compete with their global counterparts when it comes to deliveries and logistics.” It further added that it “estimates the deal will result in over 257,400,000 deliveries on its platform over the next five years, with an estimated aggregate transaction value of $9 billion.”
Originally, the company predicted that “a full national deployment [was] expected to be in place in 2017”. In December 2017, it said that “live rollouts [are] planned from Feb 2018 onwards.”
However, according to the AFR, the Commonwealth Bank of Australia (ASX:CBA) said, “The GetSwift application is not yet in pilot phase, so until we are comfortable with the performance of the solution we are unable to comment any further. The update made by GetSwift to the market on 18 December was not approved by Commonwealth Bank.”
The article also threw doubt on a number of the other contracts, so it is quite reasonable to question how many of the contracts are actually proceeding as planned.
As I have said previously, I would not hold shares at the current share price until the company can actually show some significant revenue and gross profit (if not actual bottom-line profit).
With the share price almost certainly falling once the shares start trading, those shareholders who don’t see the writing on the wall will be wondering whether to hold on.
In my opinion, Getswift is still overvalued at current prices, and is probably going to be overvalued, even when shareholders have the ability to sell their shares. The company has very little revenue; just a bunch of deals that it claims to have signed. One thing going for it is that it managed to raise $75 million at $4 in a capital raising lead by Fidelity International (FIL Limited), which was a buyer of ResApp Health Ltd (ASX:RAP) at above 30c per share.
Taking into account cash reserves, if management were to change, I would value the company at slightly above cash backing (that is, around 60c per share). However, under current management, I would value the company at well below the value of the cash on its balance sheet.
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Claude Walker is a Motley Fool investment advisor. He does not own shares in any of the companies mentioned in this article. You can follow Claude on Twitter @claudedwalker. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691).