Forget Marks & Spencer‘s lacklustre Christmas and Carillion‘s cash crisis, the biggest and brightest stock market story of the week is surely the extraordinary debut of AIQ (LSE: AIQ). Having raised £4m gross (£3.6m net) at 8p a share, the shares began trading on Tuesday, ending the day at 9p. On Wednesday they rocketed to 38.5p and yesterday to 125p.
That’s a 1,462.5% rise in the space of three trading sessions. And an increase in the market value of the company from £4m to £62.5m. My curiosity was well and truly piqued and I spent yesterday evening reading its stock market prospectus.
Due diligence essential
AIQ is listed on the stock exchange’s Main Market, which might be a source of comfort for those who are unaware that the market has a Premium and a Standard segment. If you think AIM is the ‘Wild West’, think again. The Standard segment of the Main Market actually has less rigorous listing requirements and regulatory oversight. It’s essential for investors to do their own due diligence.
AIQ has a Standard Listing and no trading history. Incorporated in the Cayman Islands, it was “formed to undertake one or more acquisitions of target companies or businesses in the e-commerce sector.” Red-hot areas, such as “big data,” “predictive technologies” and “consumer profiling” are mentioned but the prospectus says: “Currently, there are no plans, arrangements or understandings with any prospective target company or business.”
Directors
AIQ’s founders, executive directors and controlling shareholders are Malaysian-based Soon Beng Gee (“Nicholas”) and Lee Chong Liang (“Marcus”). Its UK-based independent non-executive directors, Graham Duncan and Harry Chathli, are “capital markets specialists.”
The executive directors’ CVs would take more than an evening to independently verify but a couple of things in the non-execs’ bios caught my eye. Mr Duncan advised on the AIM admission of Hong Kong-based online advertising business Pixel Media (floated at 30.5p a share in 2006 and delisted in 2010, offering shareholders 12p a share), while Mr Chathli advised on the AIM admission of Malaysia/China clean air firm MayAir (floated at 130p in 2015 and currently trading at 96p).
Historical backdrop and valuation
The other thing in AIQ’s prospectus that particularly caught my eye was that Moore Stephens was the auditor and reporting accountant. A quick search on the Moore Stephens website turned up a familiar name as leader of the team: Marty Lau.
Mr Lau previously helped bring to market British Virgin Islands-incorporated Chinese door-maker Jiasen (floated at 82p in 2014 and delisted last year at 0.25p) and Cayman Islands-incorporated, Greater China-focused investment company Grand Group (floated at 80p a share in 2015 and kicked off AIM last year with its shares at 10p).
Furthermore, prior to joining Moore Stephens, Mr Lau had been part of a small team that had migrated from Moores Rowland to Mazars to Crowe Clarke Whitehall, helping to bring a whole string of off-shore-incorporated Asia businesses to London (including the aforementioned Pixel Media). Some turned out to be poor businesses that were over-hyped, some were outright frauds, but all inflicted substantial or total losses on AIM investors.
Viewing AIQ’s listing against this historical backdrop and seeing no earthly reason why a £3.6m cash shell should be valued at £62.5m, I have no hesitation in rating the stock a ‘sell’.