In early 2005, DAT Group, the mobile devices software company, could do no wrong. if (!( col1 == '' )) { document.write(col1) }
The company listed in late 2004 on AIM raising £6 million, with a placing price of 130p a share giving the company a market capitalisation of approximately £24 million. According the company?s listing document, DAT would use the funds raised on listing for multiple of uses, primarily to increase it?s profile and generate new sales for the company.
DAT was formed in 1996 and by the time the company listed, it had already built up clients all over the globe and could boast that its software was compatible with Microsoft, Symbian and Palm OS.
DAT was supposed to be one of a new breed of technology companies that was going to make it big by offering new services to mobile users who need access to data while on the move. Investors had good reason to be optimistic too, the AIM document set out some pretty juicy upside potential for the company:
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?Based on IDC forecasts(1), the Company has calculated that the global market for the two categories of data enabled phones, being smart phones and feature phones, will grow at a compound annual growth rate of 60 per cent. and 51 per cent. Respectively between 2003 and 2008. In 2005, due to the planned enhancement of DMP's technology and anticipated growth in shipments of data enabled phones, DMP is expected to be compatible with shipments of 341 million new phones.?
In no time DAT?s share price was heading for the stars. Along the way, the company announced a few bolt on acquisitions and contract awards, but as with most companies, the exact terms and conditions of contract wins are not disclosed and it is therefore very difficult to put a value on them. Needless to say, the UK press seemed to think DAT was on to several big deals, as the company appeared numerous times in the market gossip sections of the daily press which only added to the euphoria around the company. By mid 2005 DAT?s share price was over 500p a share, and the company could boast a market capitalisation nearing £100 million, even though the company was forecasted to have revenues less than 1/10th of this.
Alas, fairy tales don?t come true, and neither did the inflated expectations put on DAT by investors and the press. In fact quite the opposite happened. After peaking at 526p in March, 2005 the share price began to drift?.perhaps investors realised the company was looking a tad overvalued?.perhaps word was getting around that trading wasn?t quite as strong as people had hoped. Either way, the company issued a profit warning by the summer of 2005 and the share price duly collapsed to 100p. CEO David Hayes was quickly shown the door and the company further clarified the companies predicament, stating that no profit would be made in the current fiscal year and that sales would likely be in the region of £3 million, at the bottom end of original guidance. In response the shares continued their downward spiral, to the 60p region, and at this point one final blow was dealt to shareholders ? fundraising.
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How on earth a company which only months before had a market capitalisation nearing £100 million suddenly found itself asking for handouts when the shares had utterly collapsed is beyond belief. More grief was added when the original placing price of 50p share had to be lowered to 30p, but in the end, DAT managed to place approximately 17.6 million shares raising £5.3 million before expenses.
DAT isn?t DAT anymore. The company has changed it?s name to Synchronica and has brought in some new blood to sort out the mess. The company now has a market capitalisation half of what it did when listing in 2004, and actually has a similar level of cash to back then too. At 33p a share with probably around 12p-14 a share in cash the valuation looks much more realistic.
In the meantime, Synchronica can still boast to have the first over-the-air (OTA) application designed for Windows Mobile devices. The company?s ?MobileManager? application allows companies to use Windows mobile devices at lower overhead costs and removes security concerns too. One of the many tools that MobileManager offers is the ability for companies to lock the SIM card in lost or stolen phones to ensure sensitive information is not compromised.
Synchronica didn?t have a great first year on AIM. A number of investors will have made a handsome return, yet so have some lost an equal amount. Perhaps this time round the company will get the formula right for a more stable share price appreciation.