WANdisco shares suspended amid fraud investigation

Cloud data specialist WANdisco is set to see a significant hit to its 2022 revenues after its shares were suspended over fraudulent irregularities flagged during the auditing of its full-year results. This is likely to spell bad news for an additional New York listing.

- WANdisco’s full-year revenue for 2022 could fall from an unaudited $24m to $9m.

- The data activation company is just one of a number of London-listed stocks that have turned their attention to the US.

- The Global X Internet of Things ETF [SNSR], which doesn’t hold WANdisco, is up 9.1% year-to-date.

Just days after WANdisco [WAND.L] confirmed it was considering a secondary listing in New York, the data activation firm asked for its shares on London’s Alternative Investment Market to be suspended due to fraudulent irregularities.

Revenue for the fiscal year 2022 — the audited results of which were supposed to have been reported last week — could come in at $9m, down from previously issued guidance of $24m, the company said, adding that it had “no confidence” in its bookings expectations for the year.

“Forget a dual-listing, it may not even have a UK-listing after this … Is this finally the end for WANdisco?,” Tom Kennedy, an analyst at Megabuyte, told Shares Magazine. The boutique research firm has long held concerns about WANdsico’s growth and cash flow.

Up until 9 March, the day shares were suspended, the WANdisco share price had gained 42.4% since the start of the year and 359.6% in the past 12 months.

Unaudited results showed huge growth

Back in February, WANdisco reported record unaudited bookings and revenue growth. The company said in a statement that it “reaffirm[s] power of consumption model for massive IoT [Internet of Things] data volumes”.

Bookings were up 967% year-over-year from $11.9m in 2021 to $127m, while revenue surged 229% to $24m, aided by the launch of its Edge to Cloud offering, which helps businesses to be more agile.

“Driven by our investments in product, people and IoT, we’ve captured a massive opportunity to be the go-to partner for any enterprise looking to reap the benefits of their IoT investments,” WANdisco co-founder and CEO David Richards said in a statement.

On the surface, a dual listing in the US would make sense in order to capitalise on this level of growth and deliver value for shareholders. However, the fraudulent irregularities flagged during the auditing of its books have quite clearly thrown WANdisco’s growth story and future into doubt.

More companies are seeking a US listing

While investors wait to see if WANdisco can survive the scandal, the company’s decision to pursue a US listing is indicative of a wider problem facing London.

The UK government has been keen to promote itself as a "science and technology superpower”, but suffered a major blow earlier this month when Cambridge-based, Softbank-backed [9984.T] chip designer Arm confirmed it would list in New York.

In February, Paddy Power owner Flutter [FLTR.L] announced it was also considering a US listing to “yield a number of long-term strategic and capital market benefits”.

Dublin-headquartered building materials firm CRH [CRH.L] has also announced it wants to switch its primary listing to the US, which would see it leave the FTSE 100.

“There is logic to the move. A large chunk of CRH’s earnings come from the US, so that’s where it spends a lot of time both operationally and talking to investors,” wrote AJ Bell investment director Russ Mould.

Part of the attraction of trading in the US is that higher liquidity and bigger pools of capital can boost valuations, while regulation is less complex.

“Efforts to relax the listing rules to attract more companies to London come across as a bit desperate. It should be a badge of honour to list in the UK, but that reputation is dwindling fast,” argued Mould.

Funds in focus: Global X Internet of Things ETF

WANdisco is currently not held by any funds, but investors interested in data and IoT can gain exposure to the theme through the Global X Internet of Things ETF [SNSR].

The fund holds companies involved in the manufacturing and deployment of IoT devices that stand to gain from a broader adoption of 5G telecommunications infrastructure, and fibre optics. It’s up 9.1% year-to-date through, though down 4% in the past month.

For investors wanting to gain thematic exposure to big-name companies that have IPO’d in the US in the past few years, there’s the Renaissance US IPO ETF [IPO]. The fund is up 5.7% year-to-date, though down 6.6% in the past month.