9th Mar 2023 14:13
(Alliance News) - WANdisco PLC on Thursday requested its shares be suspended after uncovering signs of possible "sophisticated" fraudulent activity.
Coming just days after it announced it was exploring a potential US listing, analysts called the news a "total embarrassment" that could result in "financial disaster" for the firm.
The data activation company explained that, following investigations by its chief financial officer and chief executive officer, it has discovered "significant, sophisticated and potentially fraudulent irregularities" with regard to received purchase orders and related revenue and bookings, as represented by one senior sales employee.
Consequently, WANdisco said the irregularities will "significantly impact" its cash position and lead to "material uncertainty" regarding its overall financial position.
The firm now expects that financial 2022 revenue could be as low as USD9 million, and not USD24 million as previously expected. In addition, the company said it has "no confidence" in its announced financial 2022 bookings expectations.
On Monday, WANdisco had said it was in the early stages of exploring an additional listing in the US, though it added it remains committed to its listing on London's AIM.
Russ Mould, investment director at AJ Bell, said WANdisco's credibility has been "shattered" after uncovering the potential fraud.
"The idea that someone in the company has potentially been fiddling the books is a nightmare for management and shareholders. To go from aspirations of a US stock market listing to having your shares suspended in less than a week is a total embarrassment," he said.
Victoria Scholar, head of investment at interactive investor, agreed.
Scholar said that the "black swan event" could be a "financial disaster" for the firm, with the potential to "sharply derail its bullish trajectory" and result in a "significant negative re-rating" to the stock's valuation, depending on the outcome of the findings.
AJ Bell's Mould said what was concerning about the news was the apparent lack of controls in the company.
"The idea that a single person has managed to inflate the revenue by significantly more than management now believes it will report goes to show there is something very wrong with how the business is run," he said.
Even more shocking to Mould, however, were the firm's references to 'significant going concern issues'. This suggested to the analyst that the company desperately needs a cash injection to keep going.
"It's hard to see who would stump up the readies in light of a potential fraud. A heavily discounted fundraising now seems its only option," Mould concluded.
Shares in WANdisco are currently suspended. They closed at 1,310.00 pence on Wednesday in London.
By Heather Rydings, Alliance News senior economics reporter
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