Dark cloud over backdoor listings

A planned backdoor listing by technology company Yatango, which was backed by top-shelf advisers and boasted iiNet founder Michael Malone as one of its incoming directors, has fallen through after being hit by tough market conditions and a run-in with the corporate regulator.

Latitude Consolidated, which was the listed entity undertaking the reverse takeover of Yatango, said today the minimum $6 million capital raising needed to close the deal had not been reached.

“Accordingly, the prospectus offer will cease,” Perth-based Latitude said in a statement.

The capital raising was being jointly managed by Foster Stockbroking and Azure Capital, with law firm Steinepreis Paganin and accounting firm Deloitte also working on the deal.

Today's news comes three weeks after the Australian Securities and Investments Commission put an interim stop order on Latitude's prospectus.

ASIC requested that financial information for Yatango for the six months to December 2014 be subject to an audit, rather than a review engagement.

The financial statements for the years to June 2013 and June 2014 had both been audited, but not the most recent six month data to December 2014, which showed revenue of $5.6 million and a net loss of $2.0 million.

The prospectus included an investigating accountant's report completed by Deloitte, which also covered the December 2014 accounts.

Latitude said on July 31 that Yatango planned to complete the audit, as requested by ASIC.

Latitude told the market today that while the result was disappointing, it would continue work on its Lyndon gold project in the Gascoyne region of Western Australia.

Latitude announced plans to acquire Sydney-based Yatango in a backdoor listing in March, with the acquisition valued at about $18 million.

Yatango is a cloud-based software, services and analytics platform that has launched two product verticals; Yatango Mobile and Yatango Shopping.

In May, Mr Malone signed on as a Yatango director.

The Yatango deal was one of 72 backdoor listings announced by WA-related companies over the past two years.

Nearly all of these involved cash-strapped exploration companies acquiring an unlisted technology business.

Of the 72 announced deals, 32 have been completed, 11 have been cancelled and the remainder are proceeding.

The trend has attracted increasing scrutiny from corporate regulators, often to the frustration of corporate advisers and lawyers who say it is difficult to understand the current requirements.