Shares in cloud data specialist WANdisco (WAND) have been suspended following the identification of what could be a major fraud at the company.
In a statement, it said that an investigation by the board had discovered “significant, sophisticated and potentially fraudulent irregularities with regard to received purchase orders and related revenue and bookings, as represented by one senior sales employee”.
The company said that the discovery had seriously impacted the company’s cash position and meant “material uncertainty regarding its overall financial position and significant going concern issues”, with revenues for 2022 revised down from the previously reported $24m to as low as $9m.
It also said that it had “no confidence in its announced FY22 bookings expectations” which had led it to request suspension of the shares while further investigations were conducted.
The shock news comes just days after the company appointed a new joint broker, and after reports that is was exploring an additional listing in the US.
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This news from what has become one of Aim’s largest company will come as a hammer blow to its growing army of retail shareholders, who will have had little chance of seeing it coming. Whilst it’s possible to detect creative accounting, outright fraud is much harder to spot.
After a difficult life on the market since listing in 2013, WANdisco’s shares had risen sixfold over the last year, as it seemingly picked up a raft of large contract wins for deployment of its technology in Internet of Things applications across the automotive and telecoms industries.
In its last trading update in January, the company had pointed to strong momentum in its pipeline and steady conversion to sales, with bookings of $127m up 967% year on year. The strong news had led broker Edison to upgrade its sales figures by over a quarter, with much narrowed Ebitda losses because of the significant operational gearing claimed by the company.
The figures pointed to WANdisco emerging as a go-to supplier for cloud data applications where large volumes of edge data such as customer premises needed to be shifted to the cloud and between clouds. Now it would take a huge leap of faith to believe that its success is anything other than a mirage.
There will be few crumbs of comfort for those that are almost certain to see the value of their investments plummet, as seems likely given the clearly parlous state of the company’s balance sheet - WANdisco had previously boasted net cash of $19m and trade receivables of $44m (that last figure perhaps being the only clue that the company wasn’t converting sales into cash – because, as we now know, they were never there).
But the news should serve as a reminder that what companies say and what they actually do are not always the same – and being able to spot the difference is much harder in companies with complex structures or selling hard-to-understand products.