Sports analytics company Catapult International (ASX:CAT) is a loss making technology company that has repeatedly come back to its shareholders, asking for more cash.
At the start of the 2017 financial year, Catapult raised capital by selling shares for $3 each, to buy video analytics firm XOS and consumer wearables company Playertek. It said “these acquisitions are expected to enhance Catapult’s free cash flow.” However, in that financial year it did not produce any free cash flow, with operating cash outflow of over $6 million and investing cash outflow of more than $8 million.
In May 2017, Catapult came back to the market to sell more shares at $2 commenting, “Net proceeds from the Placement will be used to fund two key acquisitions which are in line with the Group’s strategic focus of expanding its range of products as it extends its global footprint in the elite performance technology market.”
Then again, in March 2018, the company came back to market to sell more shares, this time at $1.10. According to the ASX announcement, Catapult’s Executive Chairman, Dr Adir Shiffman, said, “This is a great outcome for the Company after what has been a period of positive transformation for the business which has ensured we are positioned to take on a significantly larger attainable market opportunity across both Elite and Prosumer.”
However, not all shareholders feel so delighted.
Indeed, the company reported that at the Annual General Meeting, “Resolution 1 to adopt the remuneration report was put to a poll. The resolution was supported by 14,853,589 votes for, with 11,970,144 votes cast against it and 98,360 votes abstaining. The resolution was passed, however this result constitutes a first strike for the purposes of the Corporations Act 2001.”
You might think that these would chastise the company somewhat, but it’s hard to believe the protest vote has had any impact whatsoever. To wit, the company today released a blog post boasting that “Our new headquarters is triple the size of our previous Melbourne location and features three meeting rooms… [it has] Bleacher seating, table tennis and foosball tables, and an open-plan communal space for staff engagement. [It is located within] Walking distance to enough cafes to keep the biggest Melbourne coffee snob happy.”
Within the last six months, directors Igor Van De Griendt, Shaun Holthouse and Kar Wing Calvin Ng all disclosed a change of director’s interest notice, having disposed of shares. If I was the director of a company that performed so poorly as Catapult, I would resign from the board (thus saving some money for the company) before dumping my stock on the market (assuming I wanted to sell). While I personally believe Catapult has enormous potential I lack confidence that the board, as it is currently constituted, will ensure a good result for common shareholders.
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Motley Fool investment advisor Claude Walker owns shares in Catapult International. 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 has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.