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#TrustBuddy: The farce continues

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TrustBuddy AB announces this morning  that all resolutions relating to the matters set out in the Notice of EGM dated 17 August 2015 were duly passed.
The following resolutions were adopted:

— Resolution on amendment of the articles of association.
— Resolution on new issue of shares with preferential rights for existing
shareholders.
— Resolution regarding issuance of warrants.
— Resolution on the implementation of an incentive programme for selected
senior executives.
— Resolution on the implementation of an incentive programme for board
members.
— Resolution on authorization for the issue of shares and / or warrants.
Chairman Simon Nathanson additionally stated the Board of Directors will subscribe to a maximum of 18,000,000 of the 24,400,000 warrants directed to the current Board of Directors as part of the approved incentive program for board members.

TrustBuddy CEO Philip Mikal said, “I am delighted to receive this support from our shareholders. The Company is now positioned to retain key personnel and continue to make progress toward our long-term goals.”

We note that this means that there will be a massive dilution for shareholders. At a first stage, the amount of shares outstanding will double. After that, there will be an additional, non-preferential, share issue of 200 million shares, adding another 25% of shares outstanding. By then, the total dilution will amount to 150% vs current levels. It does not stop there, however. With the approval given by shareholders on Friday, management and the Board can now receive shares or warrants as part of incentive programs. We are talking about the same Board that is responsible for a share price decline of some 80% during 2015 so far. Impressive track record indeed.

At current share price levels, TrustBuddy will be trading at an enterprise value of around SEK 300m after its monster share issue, but not including the effects from the incentive programs to management and the Board. These will make things even worse, naturally. With 2015 revenues approaching SEK 90m at best, the current valuation of EV/Sales 3.4x is far from attractive, in our opinion.

We believe it speaks for itself, that neither the Board nor management has bought any shares on the market over recent months. Instead they await to either participate in the directed share issue, which will we believe will happen at a substantial discount to current share price levels, and/or to receive shares and/or warrants as part of the incentive programs that were now approved. Nice way to play it safe, on the account of ordinary shareholders.

Nordic Investor

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