Poseidon Concepts Corp meltdown is a sad reflection on the securities industry
The world of securities regulation is scary. One the face of it, it is designed to protect investors from scurrilous propositions from companies. In reality it is so caught up in the weeds that the obvious is lost. This stock was being pumped when the obvious was clear.
Take this latest one in Canada. Poseidon promised “Poseidon has established a unique service offering”.
The stunning meltdown of Poseidon Concepts Corp. continued on Thursday after the company warned it could take “significant” writedowns as it struggles to collect payments from customers.
Poseidon also shook up its leadership and suspended its dividend. The announcements point to a company in disarray, analysts said, and one that grew too quickly for its overwhelmed management team to handle. The stock plunged 55%.
That promise on the company’s website ought to be enough to create suspicion. The word ‘unique’ in itself means nothing. Nothing is unique anymore.
Here is the key latest information:
Everything changed on Nov. 14, when Poseidon shocked investors by reporting extremely weak earnings and writing off $9.5-million of accounts receivables that it failed to collect. Accounts receivable were $125.5-million at the end of Q3, far ahead of the actual revenue total of $41.1-million.
When your write offs account for 25% of last revenue booked, there is a problem. My only point here is that securities regulators are run by lawyers and with little sense of business metrics. This one should have been foreseen.