Small caps under fire as ASX increases cashflow scrutiny
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The ASX appears to be escalating its scrutiny of small caps with questionable cashflows.
So far this quarter the stockmarket’s compliance officers have queried about twice as many cashflow statements as last quarter.
Since deadline day for quarterly reports the bourse has questioned no fewer than 25 companies – running a fine-tooth comb through their quarterly receipts and projected outflows.
That’s compared to 11 queries last quarter – or 45 in total for 2017 — according to the ASX tally.
>> Scroll down for a list of companies facing ASX questioning
Junior minors were the most quizzed companies – making up almost half of the queries.
“The company is in mining exploration and does not have a revenue stream,” CLL responded.
Similarly Davenport Resources (ASX:DAV) said negative cashflows were largely down to the purchase of three mining licences in Germany, which it hoped would be its revenue-generators.
ASX Spokesperson Matthew Gibbs told Stockhead this quarter’s increase in queries was not result of a crackdown but rather of increasing awareness.
“It has been an area of focus where the ASX has been raising awareness among companies about their disclosure requirements,” Mr Gibbs said.
“ASX takes supervisory action according to the circumstances presented.”
Questions from the bourse gave HIV drug developer Biotron (ASX:BIT) a push to announce its latest capital raising.
Biotron was quizzed on its $672,000 bank balance – but said it was bolstered by a partially underwritten rights issue to raise $1.47 million, announced on the same day.
“Yes. The company does not have a revenue stream and, accordingly, expects to have a negative operating cash flow for the foreseeable future,” it said in response.
Early-stage temperature monitoring tech CCP Technologies (ASX:CT1) said its position was simply a symptom of its infancy.
But other tech companies were quick to defend their position – sharing details of potential soon-to-be receipts.
“In terms of cash flow, the negative cash flow for the March quarter 2018 occurred due to customer receipts being received after quarter’s end. Customer receipts of RMB 7 million [Chinese yuan] were received for the period from 1st April 2018 to 9th May 2018,” Fintech Chain (ASX:FTC) wrote.
Registry Direct (ASX:RD1) said negative cashflow would continue while it worked on acquiring customers for its share registry services — but it would soon receive an R&D tax incentive payment.
This quarter throws a spanner in the works for what has been a downward trend in 5B queries – 45 reported last year, down from 50 in the year previous and 62 the year before that.
It follows increasing scrutiny on small caps after changes to continuous disclosure obligations earlier this year.