What happened to Buddy Platform Ltd?

For a while Buddy Platform Ltd (ASX: BUD) was looking unstoppable.

The company’s share price skyrocketed from around 5 cents in February last year to hit 40 cents in November, gaining about 700 per cent in 10 months.

Back in May David McLauchlan, Buddy’s CEO, boasted of his company’s success to Fairfax Media Limited (ASX: FXJ).

He told the Australian Financial Review that orders for the company’s Buddy Ohm system had been booming.

“It’s gone absolutely nuts in terms of the volume of interest,” Mr McLauchlan told Fairfax Media.

The Buddy Ohm product monitors the consumption of resources in buildings and tracks the use of electricity, gas and water.

“What we’ve built is a Fitbit for buildings,” Mr McLauchlan was quoted stating in the AFR.

And it appeared the ‘Fitbit for buildings’ was a hit.

“We have underestimated the demand. We’ve gone back and redone all our numbers,” Mr McLauchlan said.

Buddy Platform stated in October last year that it had signed contracts worth more than $52 million for the first quarter of financial year (FY) 2018.

Last month the company stated that it had signed contracts in the second quarter that management forecast to hit $69.3 million in revenue, a 33% increase on the previous quarter’s result.

However, it seemed those potentially fruitful contracts were not bringing in the cash quite as fast as many had hoped.

Buddy Platform stated that cash receipts from customers for the second quarter of FY 2018 totalled $418,000 compared to $407,000 reported for the prior quarter, an increase of 3%.

As such, while the value of contracts signed had jumped by 33% the amount of cash coming in was up by just 3%.

But, with the company announcing in November that a deal with Telstra Corporation Ltd (ASX: TLS), in which the telco was to become a primary supplier of its Buddy Ohm product, it appeared investors were more concerned with the company’s future prospects than its current financial standing.

Indeed, with significant increases in projected revenue and seemingly big deals on the cards, Buddy’s prospects were looking good.

So, with business looking so good, why did CEO Dave McLauchlan start selling millions of dollars’ worth of Buddy Platform shares in numerous transactions in January?

And he wasn’t alone, with other Buddy Platform directors Alexander Gounares, Richard Borenstein and John van Ruth offloading stock in the company in January.

Was it just a coincidence or did they know something they weren’t sharing with the market?

There’s a lot of questions concerning Buddy Platforms’ activities and the company has been suspended from trading as the ASX seeks answers.

Perhaps soon we will know more.

Until then, I’ll say again that while such uncertainties linger around Buddy Platform, I would steer clear of the company.

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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