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An Open Letter to the FCA - how have you allowed a £180 million utterly false market to be created in just over two weeks & will you fix it?

By Tom Winnifrith | Tuesday 12 September 2023

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

The FCA has failed again in its role as the body charged with approving prospectuses for companies listing on the Standard List. I refer to RegTech Open Project PLC (RTOP) which listed on 25 August with a £60 million valuation at 100p and which is now capitalized at £180 million. But it is clearly an almost worthless entity. Folks are going to lose a lot of cash. I have written to the FCA begging it to put an end to what is clearly a false market.

Ref Regtech Open Project PLC – a false market enabled by yourselves

September 12 2023

To the FCA

Sirs. On August 25 2023 Regtech Open Project listed on the Standard Market after the FCA approved its prospectus. At 100p it was valued at £60 million. The shares are now 304p giving a market cap of £181 million. Yet any sensible analysis shows that it is worth almost nothing. Errors by the FCA has created a false market where innocent investors will lose vast sums. I beg of you to suspend the shares, at least until a corrective prospectus is issued.

The prospectus was misleading in 3 ways.

1. Its treatment of historic tax losses as an asset was non IFRS compliant and thus served to materially overstate net assets

2. It stated that warrants issued to the main man, Alessandro Zamboni, were exercisable at 20p yet in an RNS on 11 September in which said warrants were transferred to settle a debt, it was stated that the strike price was £1.

3. But the real issue was a valuation report provided by a tiny Milan firm, MadTax, justifying the initial £60 million market cap. Last year, excluding £300,000 of related party sales to Supply@ME Capital, Regtech saw its sales plunge by 40% to just over £700,000 and – naturally – despite capitalizing a stack of costs – it lost money. It was technically insolvent prior to the IPO and was shedding staff to cope with its sales shrinkage.. But MadTax said it was worth £60 million based on – unstated – future projections.

But the management of Regtech has already shown when running Supply@ME Capital that it has made projections about multi million profitability which have been a complete fantasy – Supply still has almost no sales and is loss making.

Specifically in July 2021 Supply guided analyst Ed Stacey of Proactive to forecast calendar 2021 revenues of £12.1 million and EBITDA of £7.7 million. Within six weeks it admitted via RNS “As result of internal analysis, the Board of Directors expects to generate consolidated revenues for the year ending 31 December 2021 in the range of £3.8m - £4.9m”. In fact 2021 sales came in at just £0.5 million and the company recorded a loss of £12.5 million. In case you think the jam tomorrow was just delayed, 2022 sales were just £0.7 million and the loss was £9.9 million.

Given that Supply’s founder is Regtech’s founder and that the two share a common chairman, surely the FCA should have really questioned this valuation.

It did not, the shares were listed and with Zamboni and 12 of his mates who it is claimed bought c£18 million of shares between them at £1 each from Zamboni’s company pre IPO controlling almost the entire free float, the shares have been pumped higher in what is clearly a false market. Regtech has almost no cash and at 304p trades on around 250 times underlying ( i.e. excluding related party) historic sales.

Gravity cannot be defied forever and fingers will be burned. The fingers of those the FCA is meant to protect. The shares should be suspended until Regtech reissues a prospectus so that it is IFRS compliant and comes with a credible valuation.

I remain, your obedient servant,

Tom Winnifrith 
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