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Here’s why shares in $1 billion tech player iSignthis just got suspended by ASIC

A red stop sign, indicating an ASX share or company is in a trading halt
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iSignthis Ltd (ASX: ISX) shares are locked in a trading halt today after the company admitted both ASIC and the ASX are looking into a number of issues around the business. 

Only yesterday the stock rocketed 15% from 93 cents to $1.07 on the back of a company announcement boasting that actual annualised gross processing turnover volume (GPTV) across its ‘Paydentity Ecosystem’ stood at more than $1.9 billion as at September 30, 2019. 

As at August 30 2o19 it reported GPTV had grown to $1.1 billion, which means the additional $800 million in GPTV over the last month is an eye catching achievement.

So eye catching that it appears to have spooked regulators into action, with its rocketing “GPTV” growth over the last 12 months propelling the stock from 16 cents to $1.07 today

iSignthis reports its business model is to provide client ID verification and ‘payment services’ via its platform to enterprise users, with the GPTV rocketing as more enterprise users sign up. It claims to deduct fees from GPTV which if true would be an excellent business model, although it has yet to really demonstrate it. 

It reported a $384,000 operating loss on $7.4 million in sales revenue over the six months to June 30, 2019, with cash on hand around $9.9 million as at the period end.

The market cap has ballooned to $1.07 billion based on a whopping 1.089 billion shares on issue with independent financial watchdog Ownership Matters recently questioning its corporate governance. 

Based on the financials and hazy business model no serious investor would buy into the business at today’s valuation, with the trading halt imposed by regulators an ominous sign.

The suspension is most likely related to iSignthis’s disclosures, corporate governance, and general compliance with the financial services laws.

Other high flying tech or start-up type stocks to come crashing back to earth recently include GetSwift Ltd (ASX: GSW), BigUn Ltd (ASX: BIG) (now defunct) Yojee Ltd (ASX: YOJ) and 1-Page Ltd (ASX; 1PG) (now defunct).

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

 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.

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