Member Info for Pianista

It’s now 20 days - though it feels like 20 years - since we were told they were in “urgent” discussions with potential new auditors.

What I find so irritating - apart from the endless information blackout, even after Meidar’s appointment – is that when GT’s resignation was announced, DX insinuated that GT’s allegations weren’t entirely correct, that they had a reasonable defence, and yet they obviously haven’t followed up on this, by for example referring the matter to GT’s regulator, the ICAEW, otherwise we’d have been told about that.

The worry, therefore, is that there is indeed sufficient truth in GT’s allegations to make it impossible for any other audit firm to accept the appointment as things stand.

The obvious question, therefore, is what on earth needs to happen within the company to break the impasse and allow an auditor to act?

After being in denial for at least four months, the pressure felt by management to make whatever changes are necessary must be becoming unbearable, so it’s news of that, with or without news of the appointment of an auditor, that I’d expect to hear about very soon indeed.

Ports - I see that this case, involving DX’s previous auditor KPMG, was to do with bribery (despite which the auditor didn’t find it necessary to resign). There’s an amusing irony in the fact that to avoid prosecution for bribes RR effectively paid a “bribe” to the authorities. Perhaps DX could do the same, if applicable!?

Apart from the FRC now reminding auditors to be “alive to the risks of companies’ non-compliance with laws and regulations…”, GT will have been extra careful anyway in its dealings with DX after having had its knuckles rapped over Patisserie Valerie.

Add to that, the fact that after decades of consolidation, the number of audit firms large enough to take on a client like DX has diminished, and that there are resource issues in the audit profession generally following Covid, and we have a perfect storm.

In contrast, in normal times, the governance issue at DX would probably not have turned into the crisis it has become. Audit firms have been glossing over these sorts of issue all the time, so it’s ironic, and rather hypocritical of them, if they are now turning their nose up at DX! GT must be ****ging off DX to prospective auditors something rotten.

You'd be lucky to get 10p on the OTC at the moment, so I'm not even thinking about that. If you don't need the money, best wait...

The main thing on my mind is not so much the threat of delisting, but the ongoing difficulty they’re having finding an auditor, because that appointment is the key to unlocking this conundrum, and something no company can do without, whether listed or not.

Any talk about what may happen to the company in the future is academic until this is resolved.

But it increasingly looks like that will not happen until they make whatever management changes, however unpalatable, are demanded of them.

The next few RNSs should make fascinating reading.

The two NEDs were the Audit Committee, so I think, without knowing the full story, it was entirely appropriate for them to investigate. They weren’t marking their own homework though - that was the job of the external auditors, who came along afterwards to check, or to try and check, their work.

It’s now 15 days - though feels like 15 years - since we were told they were in urgent discussions with potential new auditors...

"There is an assumption here that the BOD WANT to avoid a delisting." (ATPM).

There’s no point in engineering a forced delisting. No shareholder, including IIs with huge amounts stake, would want that, so they’d simply reverse it by forcing a relisting, assuming DX do eventually find an auditor.

Furthermore, you can turn your back on AIM, but not on the Registrar of Companies, who will ultimately disqualify the directors if audited accounts remain outstanding. HMRC are also being kept waiting….

Meidar might be wishing he hadn’t managed to muscle his way onto the BOD!

One of my other investments was caught making "questionable payments" about 5 years ago. The SFO got involved, and their investigation is still ongoing. The auditor never resigned. The business and the shares are currently on a high.

DX's situation must be different in some important respect. Maybe it was just the lack, or perceived lack, of cooperation with GT, and this ended up being the final straw in their allegedly strained relationship.

Sister - the problem is, the Sec of State’s power was not really intended to be used in the current situation, ie when no auditor will agree to act for professional reasons.

It’s more for when a company just hasn’t got round to the task of choosing one.

Consider this: if the Sec of State appoints auditor X, what happens if auditor X has already refused to act? The Sec would have to find someone else. But any auditor is likely to have the same objections as auditor X……

That’s why I say the solution to this impasse must lie within the company itself (eg changes at the top).

I’ve never known a company have so much trouble finding an auditor. We must be the unluckiest shareholders in the world!

We don’t know exactly what the problem is, only that it’s something to do with the “disciplinary issue”.

But if the impasse goes on for much longer, you have to wonder what needs to happen to break it.

I suspect it will take big changes at the top, which have so far been resisted. If so, this will be the company’s main preoccupation.

In the short term, this would create considerable uncertainty, but there may be no choice.

I've not seen any reference in the AIM rules to a 5 year wait, or a wait of any length for that matter.

So as far as I'm aware as long as the company has everything up to date, it can be readmitted.

My main worry right now is how long will the inability to appoint an auditor go on for?

What is happening – or not happening! – is extremely disappointing and worrying, and we must brace ourselves for a delisting, though if we do get news of an auditor's appointment imminently, the chances are it can be avoided.

However, delisting - which no one has asked for - need not be permanent. Indeed, I would say the first DUTY of the BOD would be simply to restore the listing - and as soon as possible.

Assuming the failure to appoint an auditor does not continue for too much longer, I would think they could reapply to AIM as soon as next year - I’m not aware, having quickly checked the AIM rules, of any “waiting period” on relisting.

So if delisting cannot ultimately be avoided, I would expect a clear statement from the company affirming its intention to relist. (Obviously they are not going to say anything unless and until delisting actually happens). This would take a lot of the sting out of shareholders’ criticism.

If the company failed to give such an assurance, I would expect shareholders to force the issue.

Meanwhile, there is no need for the BOD to be distracted by “strategic alternatives”. They need to just get on with running the business and, if the company is delisted, reapplying to AIM.

With or without Putin, the world will never again be "normal". The political/media establishment will always be obsessed with some myth or other, be it climate change, plandemics, or that Ukraine is about good vs evil...UFOs will be the next thing.

Ports - technically they can't issue interims till the previous year has been closed off by the publication of the Annual Report. So no additional breach of the rules here.

This article says nothing we don’t know already - which isn’t much!

If DX is delisted, it doesn’t change from plc to private, it becomes quasi-private perhaps, in the sense that its shares can no longer be traded on AIM (one knock-on effect of which is that they can’t remain in an ISA).

But all that matters at the moment is that the company, incredibly, is still without an auditor. It’ll be more difficult - though not impossible depending on the arguments the company/NOMAD can come up with - to get an AIM extension as long as this situation continues. I’m sure it will find an auditor eventually – it has to – but if “eventually” means September, say, it may be too late to save it from delisting.

The business is still doing ok, they say - so there is considerable value in our shares even if we can’t access it - though it’s difficult to imagine senior management enthusiastically turning up for work every day with this impending disaster hanging over them. If the worst does happen, and they don’t come up with a plan to enable shareholders to access that value - and also to compensate shareholders for any consequential losses - they’ll be praying that the next shareholders’ meeting will be another virtual one!

Yes, weasel words I’m afraid. The harsh reality is probably that no one has yet agreed to take on the audit. But the company do have to find a way through...somehow. Perhaps something needs to change, e.g. within the management of the company, in order to break the impasse.

I agree with Alas, the FCA are generally regarded as worse than useless, and I wouldn’t rely on them to investigate anything based only on a suspicion.

Thanks for the link though, FJ. It’s good to see someone get his come-uppance, but sadly it’s just one case out of countless others where no action is taken. In the case cited, the company itself admitted via RNS that cash had been massively overstated by the CFO. The FCA merely had to tick through the numbers.

On the other hand, “playing down the governance issue” is much more subjective, and inherently more difficult to prove. It depends on the facts though. Maybe there are people outside the company who are familiar with all the relevant facts, but I’m not one of them.

FJ: trying to establish and understand the facts is not being an apologist. I'm just a worried investor, but I haven't lost anything yet (except a lot sleep), and haven't lost hope of a good outcome. But if ultimately I do lose money, I'll be the first to take legal action, I can assure you.

FJ: You can't say they played down the seriousness unless you know how serious it really was. I for one have no idea how serious it really was. Mere suspicion is not enough.

I mean, it's conceivable that the auditors have made a meal of this, and that if we delist it would essentially be down to them. Who knows?

LCP: "The FCA live for criminally sanctioning directors etc".

I'd like to think that was true, but I'm personally not aware of any plc director having been criminally sanctioned by the FCA (apart from directors in the financial services industry).

I'm happy to be put right though. Perhaps you could give one example where it has actually happened?

Many of us certainly suspect that the governance issue was played down, but what direct evidence of its seriousness will you be providing to the FCA?

Let us know, and I’m sure many here will gladly join you.

The SP no doubt reflects the current market view - following lacklustre final results and the absence of any outlook - that Trak will just bump along breaking even. But, as we've seen so many times before, it wouldn't take much in the way of news to see it back at 20p+ .

Trak is currently in SAAS’s books at 10m @ 22.5p = £2.25m. At the current SP, the holding’s value drops back to 10m @ 15p = £1.5m, so as things stand a loss of £0.75m will need to be booked by SAAS for calendar 2022.

Could this provide the stimulus for SAAS to take the bull by the horns - and extract some real value from its association with Trak - by making a bid and integrating the business with its own?

There won’t be a better time for SAAS to pounce: at 30pps for example, a 100% premium to the current 15p bid price, they’d only need to shell out a paltry £12m for the c80% they don’t already own.

And since Trak looks set to keep its head above water indefinitely, there’s no point waiting for administration.