Hi Dang Son and everyone else,
I intend to now put this question to bed once and for all.
Many here will remember an Australian company GetSwift and the games it tried to play to 'ramp' its share price which led to it delisting on the ASX and I believe moving to Canada.
In short it was committing a fraud on its shareholders and the market by fabricating and exaggerating the extent of an engagement that it claimed to have achieved. It was discovered and successful prosecutions launched.
In consequence of this case the ASX revised completely its approach to 'ramping' and how it deals with companies it considers are engaged in this practice. The prosecution of the female tech founder and her subsequent imprisonment in the USA has placed even greater focus at the ASX on technology companies particularly those like Brainchip which has revolutionary technology that is not understood by most and which organisations like the Australian Financial Review, Motley Fool and ***************** have been calling out for being driven by retail to unstainable levels with unproven technology the 'WANCA' effect in other words.
Though I am a retired lawyer the very fact I am retired means I cannot provide legal advice so I will reproduce advice from actual practising Lawyers to their clients regarding this issue:
Thinking | 9 June 2021
ASX cracks down on ‘ramping announcements’
By Michelle Eastwell and Vanessa Murphy
The use of ‘ramping announcements’ has been on ASX’s radar for some time now. Listed companies should carefully consider the content of and language used in market announcements, following ASX’s latest update to Guidance Note 8, which came into effect on 5 June 2021.
As the name suggests, a ‘ramping announcement’ is made with a view to ‘ramping up’ the price of securities and can take a variety of forms. Examples include announcements that contain no new material information or substance but are issued under the guise of ‘business updates’ or on the back of strong market sentiment in a sector. A quick series of announcements intended to pique investor interest but which aren’t particularly material can also be ‘ramping announcements’.
‘Ramping announcements’ can also take the form of an announcement that an entity has entered into what appears to be a material contract but with very limited information disclosed to actually assess the materiality of the contract and its impact on the price or value of the entity’s securities. This has been a particular area of focus for ASX.
Examples of ‘ramping announcements’ identified by ASX include:
- announcing a contract with a major customer to leverage off the customer’s reputation, without properly quantifying the benefit to the entity. In one instance, this included disclosure of a ‘material commercial agreement with a leading financial entity’ under which the entity was to receive less than $1,000;
- announcing a contract when in fact it is only a non-binding heads of agreement or a framework agreement that only establishes contractual arrangements that will apply to future orders (if any are made);
- projecting substantial revenues, without reasonable grounds; and
- describing a contract as ‘material’ when clearly it is not.
ASX has previously observed instances of ‘ramping announcements’ being made just prior to or after a capital raising, presumably with the intent of boosting the raising price or the post raise trading price or following the appointment of advisors where they are remunerated in securities.
If ASX suspects a ‘ramping announcement’ has been made, it will carefully consider whether to suspend trading and issue a query letter to the entity seeking further information about the announcement. In particular, ASX may ask the entity to advise what information was market sensitive, and, if not market sensitive, to explain the purpose of the announcement, and, if the announcement includes any projections or forward looking statements, the reasonable grounds on which those statements are based. This also aligns with ASX’s recent monitoring activities in relation to the disclosure of material contracts, which have involved revisiting historical announcements to assess whether matters previously disclosed are consistent with, and do not overstate, the true position reached by the listed company in relation to the relevant contract or transaction.
Where an announcement relates to a contract, ASX may ask for a copy of the contract (not for release to market) in order to verify compliance with disclosure obligations.
ASX may also require corrective disclosure to be made where information in a ‘ramping announcement’ was not material or was incomplete or misleading, advising of these matters and stating that investors should not make investment decisions based on the announcement. This is unlikely to be well received by the market.
With the continued focus by ASX on ‘ramping announcements’, listed companies should ensure they turn their minds to the appropriateness of announcements that do not clearly contain price sensitive information. While there will often be a range of legitimate reasons for making such announcements, careful consideration should be given to the language used, the timing and proximity to other announcements and the substance of the announcement.
For further information regarding disclosure obligations, please contact our team.
So having read this advice and having communicated with Tony Dawe I can say that Brainchip being made aware in discussions with the ASX that they are specifically watching technology stocks and that they will come down very hard on what they consider to be 'ramping’’. Brainchip decided to take the approach that it will only release on the ASX solid gold price sensitive announcements with real income presently attaching. Potential will not be enough no matter how much it appears to be.
The above advice explains the wisdom of taking this approach as even a marked 'non price sensitive' update such as we have formed a partnership with SiFive for example could be called out as ‘ramping’ by the ASX.
Brainchip has taken the view that as a result of all of the attacks that it suffered and continues to suffer, its Australian and International reputation, at this critical point in its success trajectory would be significantly affected even by an enquiry from the ASX regarding an allegation to the effect that it was engaging in 'ramping.
Brainchip and those that control the levers clearly know they do not need to 'ramp' they are on the road to success and even though some short term pain might be encountered as a result of this approach, the company's future and its potential customer engagements are far too important to have their reputation tarnished by a 'ramping' allegation even if later found not to be proven.
I would now suggest that if you have not listened to the Rob Lincourt of DELL Technologies podcast you take the time to do so because he talks about the need for his industry which is Brainchip's industry to regain trust because of the errors that have occurred in the past with artificial intelligence and the general suspicion that exists across the market when Ai is mentioned.
The need for explainable Ai which I am sure you have read about and for trust in the automotive sector to gain the approval of Governments and politicians for autonomous driving and supporting legislation, requires Brainchip to have a squeaky clean reputation as any scandal could cause a potential partner to look elsewhere even if in doing so they give up the opportunity to be using the best technology.
So we have lots of things to thank the corrupt end of the share market for and this is but one more thing but in the end because we have the right people running the company we will come out on top in my opinion. By being ultra careful no mistakes or missteps can occur.
Please therefore in your dealings with Brainchip try to be understanding as to the tightrope they are walking with the absolute best interests of the company and shareholders always at the forefront of their thinking.
My opinion only DYOR
FF
AKIDA BALLISTA
www.frontiersin.org
thestockexchange.com.au
