Shares in digital wellness company Douugh Ltd (ASX: DOU) remain suspended on the ASX, however, the company recently provided a response to multiple ASX queries.
It’s been a rollercoaster ride for Douugh shareholders since the company listed back in October last year. From its peak of 49 cents, the Douugh share price fell back down to 17 cents before shares were stopped in a trading halt at the end of December.
Douugh is a purpose-led fintech attempting to disrupt the banking industry through an app that uses propriety artificial intelligence (AI) to better manage people’s money.
What’s happened recently?
Douugh management has run into some trouble recently in regards to some ASX listing rules that companies must abide by in order to be compliant.
What seems to have happened is that the parents of one of Douugh’s directors, Bert Mondello
, were issued 3.35 million shares in the company through a re-compliance listing. These shares were then sold in October last year for a profit of roughly $200,000.
The listing rule itself is fairly technical, but basically, it appears these shares should not have been issued without prior shareholder approval.
According to Douugh, despite Bert’s parents sharing the same last name, the participation of his parents in the re-compliance capital raising was not found in the placement due to a technical error.
It seems Douugh has recognised it needs better corporate governance measures and as such, each of the directors will undertake an ASX listing rules compliance course.
Where to from here?
Being unable to stick to ASX listing rules is not a good look for a company. Adding to that, we should remind ourselves there were other potential breaches from Douugh’s recent acquisition of Goodments.
Trying to predict share price movements is fraught with error and it’s not something I’d generally do. That being said, to me the market’s response may come across as an admission of insufficient corporate governance measures and as such, I can’t imagine the market will respond positively to it.
For me at least I think there is a valuable takeaway from this situation. A start-up might have the best idea or plans to disrupt a particular industry with a detailed growth strategy, but plans rely on a cohesive management team to put the ideas into action and successfully execute the strategy. This is one of the risks investors take by investing in an early-stage company.
If I was a shareholder of Douugh, I’d perhaps be thinking about how I balance the company’s ambitious growth aspirations with the news that it has struggled to comply with ASX listing rules. Rules which many companies are able to comply with and have no problem.
For more reading, click here to read: 3 ASX tech shares to add to your 2021 watchlist
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