Controversial software-as-a-service hopeful GetSwift Ltd (ASX: GSW) today revealed that it is to face a single class action claim from law firm Phi Finney McDonald after the Federal court ruled its application should be favoured above others from competing law firms.
The curious case of GetSwift is a good example of the many problems that have impacted the credibility of the local share market recently, with the stock swinging from 85 cents to $4.60 and back to 43 cents in just a year.
Fuelling GetSwift’s meteoric share price rise in December 2017 were a series of asinine announcements the company made over partnerships with Amazon.com and Yum Brands.
On the back of these announcements GetSwift managed to raise $75 million in capital from “professional” and retail investors at $4 per share.
This gave it a market value around $660 million, despite the fact it earned just $175,000 in operating revenue for the quarter ending September 30 2017. That’s not much more than your local Pizza Hut store, although you wouldn’t buy that for $660 million, unless you’re Fidelity International perhaps.
It was “the pros” at Fidelity who acted as ‘cornerstone’ investors in the $75 million GetSwift capital raising in what currently looks the worst investment decision I’ve ever seen by “professional investors”.
After the capital raising, GetSwift is in the curious position of having $97 million in cash on its balance sheet and a product generating just $250,000 in revenue over the most recent quarter.
It’s now possible that most of the cash raised will go towards compensation to investors and substantial lawyers’ fees. An embarrassing situation all round, even if GetSwift is ever able to deliver on its boasts by actually growing revenues to say $66 million a year, or 10x sales on its capital-raising valuation.
Don’t hold your breath with quarterly revenues currently at $250,000 and don’t Get Stiffed on the sharemarket, when you can get quality companies on attractive valuations as alternatives…
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You can find Tom on Twitter @tommyr345
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 Scott Phillips.