Amaysim Australia Ltd (ASX: AYS) shares plummeted more than 15% this morning, continuing what has been a horrible 2 years for the Amaysim share price.
Founded in 2010, Amaysim is an Australian provider of mobile and energy plans, offering SIM or data-only plans, as well as electricity and gas plans.
Share Price Carnage
The Amaysim share price hit a new 12-month low this morning, at one stage dropping more than 18% to $0.285. Shares in the company are now down more than 80% in less than 2 years.
Some very poor capital allocation decisions by management has been a significant drag on performance, with debt-fuelled acquisitions failing to live up to expectations. A highly dilutive capital raising followed earlier this year, but the share price hasn’t recovered and the selling of Amaysim shares has only intensified in recent months.
Several key management personnel have left the company in the past 2 years, including both a CEO and CFO. This has made it very difficult for the company to operate with any stability.
The competitive landscape within which Amaysim operates has made life difficult and when expected revenue growth failed to materialise, the debt accumulated from regrettable acquisitions has proven to be a real handbrake on business performance.
Is There A Way Back?
As you would expect, management has continued to deliver an upbeat message despite the grim reality, alerting investors to the long-term prospects of the business.
However, earnings are expected to fall materially in FY20 as management continues to invest heavily in future growth initiatives.
It is important when investing in ASX small caps that you find companies with a management team you can trust with your invested capital. Unfortunately, Amaysim has burnt many investors over the past 24 months.
Until its management team can provide a solid case for trusting them in their task of rebuilding the business, I will be staying well away.
[ls_content_block id=”14947″ para=”paragraphs”]
At the time of publishing, Luke has no financial interest in any companies mentioned.
