Etherstack pump straight from iSignthis playbook (afr.com)

That AFR article is from July 1st 2020 (I put "June 2020" in the topic title - by mistake - but I don't think I can change that now), so possibly a different company now, but if the same people are involved it's probably a red flag.

Here's a few snippets from the article:

Lending the whole performance a powerful sense of culmination was the bashful admission – almost an afterthought! – from chief executive David Deacon that “Etherstack has been quietly working with Samsung over the past 12 months…”

But nearly three hours later (after a pause in trading imposed by the bourse), Etherstack released “additional information”, elaborating that it “derives revenues from this global agreement in the future when Samsung and Etherstack together supply technology to Samsung’s customers”. So theirs is an agreement to develop a product both parties hope they might then sell – when and if it exists. An outright non-event.

The announcements – and the market’s ecstatic reaction to them – invited unhappy comparisons to GetSwift, which in November 2017 announced a “deal” with Amazon, had its shares frozen by the ASX on the basis the announcement was too vague, then saw its stock nearly double. Ten days later, GetSwift raised $75 million issuing new shares.

In fairness to Etherstack, its announcement at least quotes a junior Samsung executive, Wonil Roh, and was also released on Samsung’s own website. The Federal Court heard two weeks ago that GetSwift announced its Amazon trial despite Amazon explicitly asking it not to.

But does Etherstack now, with a heavy heart, turn to the market for fresh capital? Its balance at March 31? A mere US$474,000 ($687,000). Meanwhile, its share price closed at $1.04 on Wednesday, holding on to more than half of Tuesday's gains. So that would be a “yes” to the capital raising.

The moral of the story here is that good things happen to good people. By happy accident, Etherstack’s “news” came on the final day of fiscal 2020, meaning its institutional investors will mark the performance of their shareholding in the company to that $1.75 closing price (it started FY20 at 22¢). We should say Etherstack’s institutional investor (singular), being LHC Capital – the extremely lively hedge fund of Marcus Hughes and Stephen Aboud. Nobody can ever accuse them of index hugging.

In August, LHC paid $2 million for 6.7 million convertible notes (or 30¢ per unit). At June 30, they were worth $11.7 million. And on Tuesday, LHC converted half of them.

This stunning turn will at least partially obscure the epic value destruction Hughes and Aboud caused their fund investors by allocating more than 20 per cent of LHC’s total assets to shadowy fintech iSignthis. Its shares have been suspended from the ASX since October and, in protest, the company is now seeking to delist.

Deacon and Karantzis were classmates in electrical engineering at the University of Western Australia. Etherstack and iSignthis share a common non-executive director, in Scott Minehane. And iSignthis even loaned Etherstack $1 million in 2018.

Etherstack’s is a most brazen exercise in calf-fattening on market day. Which makes Karantzis’ association so fitting – given the outlandish route he took to hit performance targets for 337 million new iSignthis shares in the first half of 2018.

As we said, good things happen to good people. Now for that capital raising…

--- they have since added the following:

Apology to John Karantzis On July 2 and 7, 2020, The Australian Financial Review published articles entitled “Etherstack pump straight from iSignthis playbook” and “More alternative facts from iSignthis boss John Karantzis”. The articles referred to Nickolas John Karantzis and his company iSignthis.

Mr Karantzis considered the articles suggested he was aware of, or involved in, money laundering. The Financial Review did not intend to make such an allegation and if any readers took the article to mean that, it retracts them.

The Financial Review unreservedly apologises to Mr Karantzis for the hurt and distress caused to him by reason of the publication of the article and for any damage to his reputation.

--- ends ---

Further Reading:

Etherstack on 3000pc rollercoaster after Samsung deal (afr.com) (01-July-2020)

LHC ain't sticking with Etherstack (afr.com) (09-July-2020)

Wireless tech business Etherstack seeks Christmas top-up (afr.com) (17-December-2020)

30-June-2020: Global Teaming Agreement with Samsung re 4G/5G Public

30-June-2020: Additional information - Samsung Global Teaming Agreement

07-July-2020: ESK - Response to ASX Query

09-July-2020: Appendix 4C and Trading Update

13-July-2020: Shareholder Presentation July 2020

24-August-2020: Half Year Accounts

15-October-2020: Proposed Issue of Incentive Performance Rights

20-October-2020: Etherstack signs licence agreement with TPL Systemes

28-October-2020: Canadian Federal Police Digital Radio Network commissioned

29-October-2020: Etherstack plc Trading Update & Appendix 4C

07-December-2020: Etherstack signs $4.1m 1st stage Australian Defence Contract

09-December-2020: Business Update December 2020

09-December-2020: Corporate Presentation

18-December-2020: Successful Placement

18-December-2020: Investor Presentation

18-December-2020: Proposed issue of Securities - ESK

23-December-2020: Proposed issue of Securities - ESK 

11-February-2021: Etherstack signs new Australian Defence Contract

18-February-2021: US$1.2m deal for Samsung integration activities

23-February-2021: Preliminary Final Report

19-March-2021: Full Year Statutory Accounts

05-May-2021: Notice of General Meeting/Proxy Form

14-May-2021: WA Iron Ore Resources Network Follow On-Order

14-May-2021: Trading update

26-May-2021: New Australian Government Contract

27-May-2021: UK Defence Win and Guidance upgrade

15-June-2021: Etherstack CEO presentation to AGM

15-June-2021: Results of Annual General Meeting 

06-July-2021: H1 Trading Update Revenues up 76%

22-July-2021: Etherstack Signs A$11.6m Samsung Carrier Deal

22-July-2021: Etherstack plc Corporate presentation

18-August-2021: Half Year results and financial report

20-August-2021: 30 June 2021 Half Year results presentation

20-September-2021: Etherstack Awarded First AT&T contract

23-November-2021: FY21 Trading Update and revised Revenue Guidance

24-November-2021: Investor Presentation Trading Update

24-November-2021: Corporate Presentation Rapid Insights Investor Conference

--- end ---

Plus some Commsec info:

Etherstack PCL (ESK) operates in wireless communications technologies for customers in the public safety, defence, utilities and mining industries. Etherstack's protocol stacks are exported globally and licensed by leading radio manufacturers, while Australian solutions partner and subsidiary, Auria Wireless, manufactures complete digital radio networks using Etherstack software.

Mr Deacon has over 20 years experience in the wireless communications industry. Prior, he founded and ran an Australian wireless technology company, Indian Pacific Communications Pty Ltd, for six years until it was sold to a public company in April 2000. Before this, he led software development teams part of the wireless research and development in Perth and Sydney.

Mr Minehane has been in the telecommunications sector and part of advising investors, operators, Governments and regulators in Australia, Asia, the Pacific and Africa. His expertise are spectrum management and new generation fixed and mobile technologies including optical fibre and 4G/LTE and 5G services. He has as a separate consultancy practice, through which he has advised a range of corporates and organisations including the Commonwealth, South Australian and Victorian Governments, APEC Business Advisory Council, NBNCo, Macquarie Group, World Bank, International Telecommunications Union (ITU), Asian Development Bank (ADB), ASEAN, GSMA, Australian Competitive Carriers Coalition (Commpete), SDPPI (Indonesia's spectrum regulator), ARCIA, Macquarie Telecommunications, Malaysian Communications and Multimedia Commission (MCMC), National Broadcasting and Telecommunications Commission (Thailand), Myanmar Government, TRA (UAE), KPMG, Telekom Malaysia, Axiata Group, edotco Group, and Telkom South Africa. In the past 12 months, he was the principal author of the ITU Report Pandemic in the Internet Age: communications industry responses: GSR Discussion paper on ensuring connectivity and business continuity key lessons learned (15 June 2020), and GSMA report with Network Strategies of New Zealand entitled Legacy mobile network rationalisation: Experience of 2G and 3G migrations in AsiaPacific, (May 2020). He is chairman of the Risk Management Committee.

Bear77 note: Mr (Scott William) Minehane is also a non-executive director of iSignThis (ISX) which is currently suspended from trading on the ASX for reasons that have been well documented. Over on the ISX page on Commsec.com.au, they say, "Mr Minehane has international regulatory and strategy experience in the telecommunications sector and has been part of advising international organisations (including the World Bank, ITU, ASEAN and the GSMA), investors, telecommunications operators, Governments and regulators in Australia, Asia, the Pacific and Africa for over 30 years."

Mr Stephens is a director of range of private companies and also runs a venture capital practice. He was previously Head of European Equities Sales at Salomon Brothers and Credit Lyonnais. He was a director of Tristel plc from flotation on London Stock Exchange's AIM market in 2005 until 2013. He was Chairman of Getech on flotation on AIM in 2005 until 2013 and remains a director. He has recently become Chairman of True Luxury Travel, currently focused on Africa having been Chairman and initial investor in Scott Dunn. He is also Chairman of Boisdale Canary Wharf and Chairman of Noble Rot Fine Wines. He has been on the board of Etherstack Wireless Limited since September 2007. He is a member of the Risk Management Committee.

Mr Barnes has experience in venture development, financial strategy and management, corporate finance and M&A disciplines. He started his career with Melman Pryke & Co (now part of Grant Thornton). He then had work in both accountancy practice and commerce, in developing businesses in a range of activities from software development and commercial property to regulated commodities brokers, taking senior management positions with a freight importer and a fullservice executive jet aviation company. He cofounded and had raise funds for range of startup businesses in property and telecommunication sectors including UK Telecom plc and in the securities industry and healthcare and biomass renewable sectors. He has been a Member of the teams in the development and admission to the London Stock Exchange's AIM market of both Tristel plc and Oxford Catalysts plc raising substantial funds for both companies, where he served as the Executive Finance Director and in the establishment of Amersham Investment Management Limited an FCA regulated investment management firm. He is a member of the Risk Management Committee.

Perhaps the pump and dump is now behind them. That was all last year. However, it's something to be aware of.