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Why I won’t invest in GetSwift Ltd

I’ve recently written about some Australian tech companies with excellent growth potential that I see as solid long-term investments.

These include companies like Altium Limited (ASX: ALU) – a global industry leader in printed circuit boards backed by over 30 years of investment in R&D.

Or ELMO Software Ltd (ASX: ELO) , a developer of cloud-based HR software targeting mid-sized businesses.

Or Afterpay Touch Group (ASX: APT) , which offers a ‘buy now, pay later’ interest free service for customers’ retail purchases.

You would think that I’d happily add GetSwift Ltd (ASX: GSW) to this list of tech success stories. Since going public in December 2016, the company’s shares have skyrocketed from their listing price of 20 cents to close Friday afternoon trading at $2.92. According to its website, it has clients in over 67 countries, including big-name brands like Pizza Hut, the Commonwealth Bank of Australia (ASX: CBA) and even global ecommerce giant Amazon.

GetSwift offers “last mile” technology solutions to its clients. In supply chain management, “last mile” refers to the transportation of goods from a hub like a store or warehouse to their final destination at a customer’s home. GetSwift’s product offering includes smart routing, automatic dispatching, real time tracking and digital proof of delivery.

So far so good. We live in an ecommerce age where more people shop online and expect almost everything from food to fashion to furniture to be delivered to their door without delay. And companies who provide delivery services will probably be in need of some sort of cheap, digital way to track their dispatches.   

But there are plenty of sceptics who are looking at GetSwift and wondering if everything really adds up.

Take for example that contract they supposedly have with CBA. On December 18 GetSwift announced that they expected revenues from their “multi-year, exclusive partnership” to start “manifesting in mid-2018”. CBA, on the other hand, told the Australian Financial Review that the trial wasn’t even in its pilot phase yet, and they hadn’t approved GetSwift’s December market announcement.

Or an exclusive three year contract GetSwift claimed it had signed with fruit delivery company the Fruit Box Group which was projected to involve more than 7 million deliveries. Fruit Box told the AFR it had trialled GetSwift’s service but then turned it down.

Or the contract it supposedly has with Amazon, which when announced sent its share price soaring 84% in a day and caused the ASX to suspend trading in the company. GetSwift didn’t reveal any substantive details about the arrangement and said it couldn’t provide an estimate for the number of deliveries the contract might involve. Still, the announcement generated enough buzz for GetSwift to raise $100 million through an equity placement it launched about a week later.

But short sellers are now beginning to swarm around the stock – as at Wednesday, 33% of its issued capital was reported as sold short. This is a pretty good indication that speculators were tipping GetSwift’s share price would drop – and indeed it did, shedding almost 7% of its value on Friday.

This isn’t to say that all GetSwift’s contracts are bogus or misleading. Fast food brand Red Rooster is reportedly happy with its product and is closely involved with the company, as is takeaway delivery service Tucker Fox.   

Foolish takeaway:

The thing I don’t like about GetSwift isn’t necessarily its product – in fact, it sounds like it could have a lot of potential. What really turns me off is GetSwift’s vague, non-substantive announcements that seem solely designed to blow hot air up its share price. Put simply, GetSwift is making it hard for me to trust it.

But I’ll happily be proved wrong. GetSwift is due to release its quarterly results later this month – perhaps if it can back up its bravado with some actual numbers GetSwift can still turn me into a believer.

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Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended ELMOSFTWRE FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO and Altium. 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 has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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