It was hard to imagine the news flow getting worse for London as a capital market this week. WANdisco has managed it.
The Aim-listed software company, proudly dual-headquartered in Sheffield and San Ramon, California, said on Monday it was considering an additional US listing.
The group, then with a market value of about £900mn, has been making those noises for about six years and, frankly, in another week no one might have paid much attention.
Yet on the back of news that building materials group CRH will shift its listing to the US, and the suckerpunch that SoftBank will opt for a US-only listing for Arm, the slight shift westwards of one of the UK’s crop of listed tech companies felt something of a blow.
But hey, most of WANdisco’s revenues come from the US. The company helps customers move big chunks of data quickly and securely between different systems and we apparently live in what founder and boss David Richards calls the “data activation era”. High-growth tech companies, we’re repeatedly told, get a better valuation stateside.
Not this time. On Thursday the company said it had mislaid about 60 per cent of its expected revenue for last year. After discovering “significant, sophisticated and potentially fraudulent irregularities” with orders, “as represented by one senior sales employee”, the company thinks sales could be as low as $9mn compared with the $24mn expected.
Quite how one person could inflate or create $15mn in non-revenues without anyone noticing went unexplained but it doesn’t say anything good about WANdisco’s internal controls. The company’s shares, which had bounced around between 200p and 400p for most of the past couple of years, suddenly took off last autumn. Now suspended, they had tripled since the beginning of November on a series of bullish announcements about contract wins.
There was the “largest ever contract” of $25mn with a “top 10 communications” company in September; the “record $31mn agreement” with an unnamed “tier 1 global telecommunications supplier” in December; then the $12.7mn contract with a “global European based automotive manufacturer” announced two days later. The company is investigating but says it has “no confidence” in its bookings pipeline and flagged “significant going concern issues”.
This all feels like a greatest hits of reputational shortcomings. London’s junior market Aim was memorably dismissed as “a casino” by one US regulator in 2007 (when it was succeeding in nabbing US listings). The growth market has, I was assured by one senior City figure recently, now found a “good balance” in terms of standards.
London also has history with software groups and questionable revenues, such as the fallout after Hewlett-Packard’s purchase of Autonomy. In fairness, WANdisco’s statement gave no indication that accounting chicanery is the issue here. The company has been shifting towards a “commit-to-consume” model, where customers sign agreements for business over several years. But some of the chunky contracts announced last year were one-offs, where sales would be recognised upfront. It’s not clear how much of the company’s $127mn in bookings made last year (up a mere 967 per cent on 2021) remains in the realm of the real.
One fillip for London? WANdisco does suggest that you don’t need a US stock market presence to fully imbibe of Silicon Valley’s “fake it til you make it” culture. Founder Richards, who was pushed out by the board in 2016 only to return a few days later, last year put the company’s total addressable market, or TAM, at $14bn. In an interview published this week, he said the company had no competition in the area of live data movement: “we have 100 per cent market share”. He added: “Ten enterprise sales guys pulled in $127mn in bookings. We think we can get to a billion dollars of bookings with 20 salespeople, and be the most profitable company the world has ever seen.”
On reflection, New York, perhaps you can have this one.