The story of logistics software company GetSwift Limited (ASX: GSW) has become something of a cautionary tale amongst tech investors. Back in 2017, it was the rising star of the ASX. The GetSwift share price soared well over 300% to an all-time high of $4.60 in the space of just a few months. Its last-mile delivery management software was apparently being adopted by some major companies, including the Commonwealth Bank of Australia (ASX: CBA) and Fantastic Furniture.
But sometimes when things sound too good to be true, they really are too good to be true. It soon emerged that deals with many of its key clients – Commonwealth Bank among them – hadn’t actually progressed beyond the initial trial phase. Combine that revelation with some earlier vague disclosures about a potential global partnership with international e-commerce behemoth Amazon and things were starting to seem decidedly fishy.
Soon, several damaging reports emerged in the Australian Financial Review (among other publications) accusing the company of failing in its continuous disclosure obligations by not updating the market about material changes in its business circumstances. In the fallout, GetSwift shares were hastily suspended from trading. When they finally resumed trading in late February 2018, they promptly plummeted back down to under $0.50 a share. And there they remained for well over a year.
But recently, something a bit strange has been happening. Despite the fact that a number of its directors and executives have to face up to ASIC next year and there are multiple shareholder class action lawsuits still on the horizon, the GetSwift share price has been steadily marching upwards. Since the beginning of August, GetSwift shares have skyrocketed 230% to $0.66.
Why is the GetSwift share price on the rise?
GetSwift’s share price resurgence is probably due to a couple of factors – the most straightforward of which might simply be time. After spending 18 months in the doghouse, GetSwift may have finally been able to convince new investors that it is turning the ship around. Given the company has managed to survive this long without another major scandal (although maybe not – more on this later), the market may be starting to forgive it for its past transgressions.
Plus, management has been busy trying to restore some faith in the company by expanding its international reach and driving strong uplifts in revenues. Its services are being deployed in as varied locations as the Philippines with Heineken International B.V. and Saudi Arabia with Pizza Hut. And total revenues for FY19 soared 159% higher year-on-year to $3.8 million. The company still posted a hefty net loss after tax for the year of $19.5 million though, which management put down to increased investment in staff as well as higher research and development costs.
Should you invest?
Short answer: no. As the old saying goes: fool me once, shame on you; fool me twice, shame on me. I would steer clear of this one, no matter how astronomical the returns might seem right now.
Remember what I said about the company surviving this long without any major scandals? Well, it actually turns out that GetSwift made another mistake as recently as May of this year, which again caused the ASX to suspend its shares from trading. This time, it had failed to update the market about its contract with Kuwait-based Kout Food Group.
Like people, companies may eventually prove themselves worthy of forgiveness, but even if GetSwift has learned from its previous mistakes (which is debatable, given its blunder in May) there are still just too many legal challenges on the horizon to make this seem like a worthwhile investment.
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Rhys Brock owns shares of Altium, Nearmap Ltd., and WiseTech Global. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Altium, Nearmap Ltd., and WiseTech Global. The Motley Fool Australia has recommended Nearmap Ltd. 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.
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