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JSE Warns Labat to Post Financial Results or Risk Suspension as Company Burns Through Cash

Company in danger of missing JSE deadline – again

The Johannesburg Stock Exchange has warned Labat Africa that it is in danger of being delisted again because of failure to submit its annual financial results on time.  The warning was published on SENS news service on 16 December 2021, barely a week after Labat announced that it was seeking a dual listing on the Frankfurt Stock Exchange and that it had secured R300 million in committed cash from Californian Investors over the next three years.

The JSE said that Labat Africa was in danger of missing its four-month deadline to post provisional results for its financial year, which ended on 31 August 2021. It said should these not be forthcoming by 31 December 2021, Labat Africa may lose its listing. Labat also missed its end-June deadline to submit its provisional results for the six months ending February 2021, but managed to stay on the bourse after it submitted reviewed interim results on 5 July 2021, showing a headline loss per share of 4,5 c.   That translated into a R18 million loss on a turnover of R21 million for the period.

 

Labat has raised about R2 billion through the issuing of new shares

Since then Labat has been on something of a roller-coaster ride. 

It’s also emerged that Labat Africa has been ploughing through cash.  The company raised R1,855 billion in August 2021 through the issue of 53 million new shares at an average of around 35 cents/share. On 8 December 2021 it issued a further 6,8 million shares at an average of around 25 cents/share, which raised an additional R170 million. In both instances the company said the funds were being allocated for “expansion of the cannabis healthcare business and working capital.”

 

Days after the August fundraising, Labat Healthcare CEO Mike Stringer resigned abruptly from his job and the board. On 28 September 2021 the company issued a statement saying:

 

“The Board has decided not to pursue the pharmaceutical side of the cannabis industry at present due to the complex and developing nature of this industry from a regulatory point of view.

 

“Accordingly, Labat will no longer be pursuing the acquisition of the pharmaceutical business and will instead focus on the off-take agreement and local retail and research aspects of the cannabis industry, which also requires substantially less funding”.

 

Alpvest emerges as major shareholder days before Frankfurt announcement

Then on 1 December a company called Alpvest Equities Propriety Limited emerged as the beneficial owner of 6% of Labat. The company, formed in October 2019 and based in Umhlanga Rocks in KwaZulu Natal has Jayandra Ramnundlall as a sole director.  Alpvest also holds 6% of Ascendis Health which is currently embroiled in a share-holder revolt while Ramnundlall himself has a string of restaurants and food businesses.

The day after Ascendis bought in, Labat issued a cautionary notice saying that it had negotiated the funding agreement with GR Global Ventures which would allow a draw-down of R300 million over the next 36 months at Labat’s discretion. Then, three days later, Labat announced it had successfully listed on the Frankfort Stock Exchange.  Ramnundlall’s sense of timing in picking up Labat stock was exceptionally beneficial.

 

Van Rooyen hopes Germany will turn Labat’s fortunes around

CEO Brian van Rooyen said the German listing was with effect from 6 December 2021 and that the Frankfurt share price would be linked to the JSE one. He said “with Germany’s new government leaders planning to push forward and legalise cannabis, the Frankfurt Stock Exchange listing will allow Labat to accelerate its cannabis portfolio offering to the international markets worldwide and will also allow new investors to have access to Labat’s shares”.

Labat’s shares have lost over 75% of their value over the last year and Simply Wall Street market commentators say that earnings have dropped by 74% a year for the last five years and that although Labat has a “mediocre balance sheet” it is trading at about 19,5% below fair value. Other risks are that the company’s share price has been highly volatile over the past three months.

The company has struggled to implement its business plan in the face of regulatory hurdles in South Africa. It’s now hoping to have first-mover advantage into the German market while it recovers from its bruising as an early operator in the South African market.

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