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Tingo - is the English Football League mad enough to allow Dozy to buy Sheffield United... more red (corner) flags

By Tom Winnifrith | Tuesday 4 April 2023


 


On Sunday in bearcast I started the case against Dozy Mmobuosi, the man behind Tingo, being allowed by the English Football League to but championship high flyers Sheffield United. Dozy says that all of his wealth is in Tingo Group listed in the USA. I now take it further with some monstrous accounting red flags which even the EFL must pay attention to.

On Sunday I incorrectly said that Tingo was capitalised at $165 million vs an apparent cash balance of $500 million. My mistake was in believing what was on the Tingo website. On a fully diluted basis Tingo is worth c$500-600 million or rather that is its capitalisation. The Sunday bearcast was damning but based on the most recent SEC filings I have a few more red flags.

1 On 31 March 2023 Tingo filed a notification that it would be unable to file its form 10K the filing of its annual financial statements for the year ended 31 December 2022 on a timely basis citing complications involving its sale of Tingo Mobile Ltd. This is indicative of weak financial controls.

2. It has had to amend its Form 10K for the year ended 31 December 2021 three times due to accounting errors. These related to how to how it was accounting for its acquisition of Tingo Mobile Plc, operating leases and share based payments. It has also had to amend its quarterly financials filed on Form 10Q multiple times as well. This is just more evidence of poor controls. Management admits in the latest quarterly filing that the company have a material weakness over financial controls since June 2022. But when the show is being run by disgraced Darren Mercer and Chris Cleverly both of whom ran companies slung off AIM in London amid scandals this website exposed in full, is that any surprise?

3. The last quarterly filing for the nine months ended 30 September 2022 reveals some odd matters. At 30 September 2022 Trade Payables were just $596,000 down from $754.7 million as at 31 December 2021. This was explained as being due to payment of suppliers for mobile phones. No credit worthy company suddenly pays all of trade suppliers unless it is getting a significant early payment discount which isn’t disclosed.

4 The quarterly accounts also reveal that associates of Dozy Mmbousi provided financing of $89.2 million in the quarter ended 30 June 2022 reduced to $85.6 million by 30 September 2022 to satisfy short term capital needs of Tingo Mobile, its wholly owned subsidiary. This transaction increased period end cash to $246 million. No interest terms, tenor or security are disclosed which is unusual and inappropriate for such a related party deal. More puzzling is that the reported profit for the nine months was a $195 million and a reported $904 million of shareholders equity so it’s unclear why a group reporting such a strong profit and equity position would need to raise more capital.

5 On page 17 the filings indicates that cash at 30 September 2022 was $246.6 million and was $128.4 million at 31 December 2021. The note also indicates that the majority of the funds are held with the company’s bank in Nigeria and that the company seeks to earn interest on such funds by placing monies on deposit. Interest received in the period was just under $1 million. Nigerian savings interest rates are much higher than US or U.K. rates so this clearly doesn’t make sense. Standard Chartered was offering 6% on deposits at the end of January 2023. Why would you pay all your trade creditors off when you could be earning a much higher return?

By the end of December the reported net cash (Tingo had no debt) was $500 million yet FY net interest costs were $750,000. Can the EFL explain how an entity claiming net cash of hundreds of millions on which it should be earning 6% actually has net interest costs?

In valuing Tingo at net cash Mr Market is saying it has no faith in the business and smells that something is not right. I suspect that the shares will continue to tumble and this very much calls into question how Dozy can bankroll a club hoping to be playing in the Premiership next season.
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