In a keyboard warrior popularity contest between HotCopper and the AFR, the former would probably win. And while Managing Director of The Market Herald (ASX: TMH), Jag Sanger, is nearly aggressively proud of that, investors aren’t so impressed. Recently, the Company’s poor financials and questionable growth strategy have led to calls for Sanger’s removal.
The Company has suspended trading of it’s shares after receiving a notice under Section 249D of the Corporations Act 2001 executed by David Brian Argyle, who states that he holds at least 5% of the votes that may be cast at a general meeting of the Company. Argyle has requested that the Company call and arrange to hold a general meeting to consider the removal of Mr Jagdip Singh Sangha, aka Jag Sanger, as a director with immediate effect.
The Market Herald is best known as the owner of sharemarket forum HotCopper, which promotes primarily penny stocks, striking advertising arrangements with companies that want to be promoted to the forum’s users. While HotCopper is paid to display ads and send promotional emails to forum users, HotCopper has historically also accepted payment in shares from its ASX-listed companies in exchange for the promotional activities. Here’s how Sanger put this noble undertaking in its annual report: “what we do is help people make decisions in a short period of time without all the information with a financial consequence and we give them that information quickly”.
However, many observers saw right through it, dubbing it a questionable promotional scheme for those who acquired shares prior to the HotCopper promotional activities, referenced by the Australian Federal Police in their raids of HotCopper advertiser, Creso Pharma.
A brief look at The Market Herald’s FY22 financials show that the Company has accumulated a slew of losses in the past year. It reported a net loss after tax of $4.6 million (down 143%), with cash and cash equivalents on the balance sheet amounting to $4.7 million at year-end, representing a 64% decrease from the previous year. Its net tangible assets were down 60%, and the total revenue and other comprehensive income declined 23% to $27.7 million.
For all the companies it so carefully invested in, it got little out of them. The Market Herald suffered a loss of over 420% on the revaluation of its FVTPL (fair value through profit and loss) financial assets.
What’s interesting is that you’d expect a company’s shares would increase in value with the promotional activities from HotCopper emails to random investors. However, the Company repeatedly found itself on the loss-making side of things in the past year with EBITDA negatively impacted by non-cash movements in its stock portfolio, falling from $15.7 million to $1.8 million.
Though The Market Herald claims to be a news media organisation, its true love is digital advertising. This was recently made evident with its Gumtree, Carsguide and Autotrader acquisitions. Of course, this is not its first foray into advertising; it has been doing so with HotCopper all along.
Sanger told Mumbrella, “As we grow we need to make the changes that all growth businesses need to make and we look forward to updating more in the future.” However, it is uncertain whether Sanger will even be there to oversee such a future with The Market Herald bound by the Corporations Act to call a general meeting of shareholders within 21 days to decide Sanger’s fate.
Alinda is a Business Reporter for The Sentiment
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