GetSwift Ltd (ASX: GSW) shares plummeted today after the company announced it received a letter from the Federal Treasurer of Australia, Josh Frydenberg. The letter was advising the Treasurer’s views on the company’s proposed plans to re-domicile itself in Canada. By the close of trade, the GetSwift share price had plunged by 10.94% to 28.5 cents. This came after the company this morning reported Mr. Frydenberg’s letter has effectively blocked the company’s plans to delist itself from the ASX, pending the conclusion of its court cases.
What’s the background behind this?
The GetSwift share price has plunged since September when the company announced it was planning to delist itself from the ASX, and list its shares with an obscure Canadian stock exchange, Neo. At that time, management said the move reflected its business strategy in North America, and the fact its significant investors are based there. Under the proposed scheme, a newly formed corporation incorporated in Canada named GetSwift Technologies would become the parent company of the GetSwift group of companies.
This move was subsequently brought to the Foreign Investment Review Board (FIRB) for approval. In a letter dated 20 November, the Treasurer advised the company that he was “considering whether I should issue an order prohibiting GetSwift from making the proposed acquisition”.
The Treasurer wrote:
Without prejudging the outcome of Australian legal proceedings currently on foot, it is my preliminary view that the proposed acquisition would be contrary to the national interest at this time due to there being ongoing legal matters concerning GetSwift, which are yet to be resolved.
What legal matters is GetSwift currently facing?
The legal matters to which the Treasurer referred in his letter concern ongoing legal proceedings brought by the Australian Securities and Investment Commission (ASIC) against the founders of GetSwift – Bane Hunter and former AFL player, Joel Macdonald.
ASIC alleges that GetSwift, through its directors, Mr. Hunter and Mr. Macdonald, made misleading representations regarding customer contracts to the ASX in 2017, which sent its share price soaring at the time. If found guilty, both men could face permanent corporate bans in Australia.
The company is also facing another class action brought by law firm, Phi Finney McDonald, on behalf of shareholders. This addresses concerns about the amount of GetSwift cash finding its way overseas, as well as the recent plans to relocate to Canada.
How did the GetSwift share price do in 2020?
As mentioned, the GetSwift share price has plunged more than 60% after its delisting announcement in September. On a year to date basis, the GetSwift share price has lost 40%. At the current price of 28 cents, the company has a market capitalisation of around $69 million.
GetSwift is a technology-based, last mile logistics provider. It makes money from customers like Red Rooster in Australia by determining the best delivery route to transport product from stores to customers’ homes. The company is yet to be profitable.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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