Call recording software company Dubber (ASX: DUB) is returning to the ASX after an inconsistency in funds came to light and its CEO Steve McGovern was fired following an investigation into $26.6 million worth of funds being unaccounted for. 

On February 27, 2024, Dubber’s board reported potential misuse of Company funds intended for a term deposit held by a third-party trustee, Melbourne law firm Christopher William Legal, led by Mark Madafferi. About $60 million of funds had been deposited into the trust account since mid-2019, with an additional $30 million deposited in August 2021. 

However, Dubber later discovered that some funds were diverted for purported commercial purposes Concerningly, $26.6 million of these funds remain unaccounted for and likely have been misappropriated and lost.

The Company immediately launched an investigation into the matter and even got ASIC (Australian Securities and Investments Commission) and the Legal Services Board of Victoria involved. On 22 March 2024, ASIC announced that it had secured interim travel restraint orders against McGovern and Madafferi, citing that they may have breached the Corporations Act in respect of the suspected misuse of the funds. 

Dubber has been working with ASIC on its investigation and noted that the Legal Services Board has commenced an investigation of its own.

As a consequence of the Company’s investigation, Dubber terminated McGovern’s employment with immediate effect.

Noting the difficulty in recovering the funds now, Dubber initiated a capital raise to secure its future. This will involve a fully underwritten $24 million capital raise at an offer price of $0.05. Additionally, directors will participate in the entitlement offer and sub-underwrite approximately $500,000. Major shareholder Thorney Investment Group will provide support by offering a bridging loan, participating in the institutional entitlement offer, and sub-underwriting. 

The funds raised will be used for additional working capital, restoring normal payment terms with creditors, settling tax debts, repaying the bridging loan, covering costs related to the financial investigation, and covering capital raising expenses.

Dubber’s core business focuses on call recording, conversation capture, and insights generation. It also plans to integrate generative AI into its offerings. Despite the crisis, Dubber achieved revenue growth of 37% in H1 FY24 compared to the previous year, reaching $18.7 million, with a loss of $14.4 million. The implementation of a restructuring program in H2 FY23 resulted in significant reductions in salaries and related expenses. 

Acknowledging the reputational damage this financial misappropriation caused, Dubber revised its revenue guidance to $38.1 million for FY24. The Company expects to incur a total of $3.3m of cash costs in FY24 in respect of the costs of the offer and investigation, with approximately $1m related to the investigations to be recorded in the income statement and $2.3m as a specific cost of the offer deducted from share capital. 

Upon resumption of trading this morning DUB shares hit a low of $0.055, 75% fall from their last close of $0.22.