Just two months since listing on the ASX, Douugh (ASX: DOU) has drawn the ire of market regulators for information leaks to media outlets in breach of stringent listing rules.
The leaks relate to the fintech company’s recently announced partnership with Humm Group (ASX: HUM) which included a $12 million capital raise as part of the announcement leak.
As reported in an Australian Financial Review article, the publication was made aware of the partnership on Friday, before a Company announcement was made by either Douugh or Humm.
In response to the ASX query, Douugh confirmed that “the board of DOU did not authorise the release of information to the Australian Financial Review, however Andrew Taylor (a director of DOU) did.”
Subsequently, the Company has confirmed that they have sought legal advice in relation to the breached Listing Rule and will ensure all board members are aware of their requirements going forward.
While the market regulators are likely to now pay closer attention to the budding fintech, Douugh has seen an astronomical rise since listing on the ASX in October at an Offer Price of $0.03 before reaching highs of $0.49 just one month later. Fortunately, damage to investors was minimised by Douugh having been in a trading halt, but this did not avoid the Listing Rule breach.
DOU shares have since come back to last close at $0.275 which is still well above the $0.22 Offer Price for the $12m capital raise which came at a time where its $165m market capitalisation defies its bottom line financials in which the Company reported a $1.29m loss from just $218 (not thousand…) revenue for FY20.
Although the $6 million raise in October for their IPO and $12m raised over the weekend will keep Douugh well capitalised in the near future, it’s going to be tough work for the Company to live up to their valuation having fired shots at Afterpay (ASX: APT). As implied by Taylor in his comments to the AFR suggesting Afterpay conducts irresponsible lending practices, he further added, “Afterpay and other buy now, pay later [services] are credit products and they need to stop pretending it isn’t and make sure people can afford it.”
Despite titling themselves as a next-gen neobank in their market commentary, Douugh appears to have gotten around the fact that they do not actually hold a banking licence, instead partnering with Choice Bank in the US and Regional Australia Bank in Australia to accept cash deposits.
From the $12m raised recently, Douugh will apply $3m to research and development and $7m towards marketing on channels such as Google, Youtube, Facebook and Instagram.
Credit warehousing and credit losses from the BNPL partnership will be provided by Humm (previously Flexigroup, ASX: FXL) which is the long-time inventor of BNPL in Australia.
Alfred Chan is an Analyst at Emerald Financial, specialising in ASX-listed small cap companies.
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