Uscom (ASX:UCM) is hardly a company worth commenting on and I am almost reluctant to dedicate keystrokes and consume precious oxygen to write this post. But here goes…
Aside from the fact that its sub-$20m market cap puts UCM at the more trivial end of the ASX medtech spectrum. Aside from the fact that the use of CW doppler ultrasound to characterise vascular hemodynamics is kind of neither here nor there (all modern ultrasound machines can do it). Aside from the fact that ultrasound instrumentation, as a general rule, is kind of a shitty business with low margins and big innovation challenges because of price pressure. Aside from the fact that despite being 10 years old, this company – based on its 2013 and 2014 financial statements – probably sold of the order of ~12 and ~20 “USCOM 1A” units (worldwide) respectively (and seems more than a little clueless when it comes to reimbursement strategy). Aside from all the truly underwhelming aspects of the company, there is another very big reason to be extremely wary of this company.
Its corporate governance stinks.
In previous commentary I have talked about the issues of corporate governance with ASX life sciences companies and, in particular, have characterised some of the common weaknesses of microcap Australian medtech/biotech company boards. In the case of UCM, this is a classic example of a company that is not really going to go anywhere while it remains under the leadership of a “lightly” composed board with a fairly narrow skill set, and a founder executive that is a Chairman/CEO/CSO all-in-one. There is even a certain lack of transparency as to who really is the executive leader of the company – from the web site it’s difficult to garner whether it is Mr. Schicht or Dr. Phillips until you start doing the customary perusing of ASX disclosures and general cyber-stalking antics.
There are plenty of reasons to believe that Dr. Rob Phillips is a bright guy and an accomplished clinician. Unfortunately the basics of corporate governance and investor relations are clearly not his strength. He is, in my opinion, the archetypal example of why most Australian academics don’t belong at the helm of public companies. Today I was forwarded several communications from individuals with an interest in the Australian medtech scene, commenting on UCM. I was also forwarded an email communication that was apparently quite widely distributed by Dr. Phillips.
Now, most people reading my blog probably don’t appreciate the extent to which I have relationships in the financial services industry. I get a LOT of information across my desk, which helps me to understand the relative quality of the companies that I watch. Most of the time when I see detritus like this, I consider it to be non-actionable. It simply leaves a bad taste in my mouth and further focuses my attention on the company’s behaviour.
But in this instance, I want to share this with you because this blatantly crosses the line and people need to understand that this is not acceptable. This communication was unsolicited, was clearly not provided under confidentiality and was not even necessarily targeted at a “sophisticated investor” (i.e. if this was a prelude to a private placement). I have no idea what the extent of dissemination of this communication was, but the basic timbre is that of a “heads up” of a potentially price-moving event and, in my opinion, creates a massive risk for the recipient in terms of insider information. Sure this communication is about engaging with potential investors, but the content is totally inappropriate and the unilateral attempt at maintaining confidentiality only exacerbates the questionable optics of this communication.
Anyone who received this email from Dr. Phillips should delete it and forget they ever saw it. Anyone who trades on this runs a significant personal risk. I haven’t seen any particular evidence of increased trading volumes or stock price movement, but I will be watching with interest to see what happens, if anything, over the next few days. The truly ridiculous thing about this communication is that only a few weeks ago the company issued an updated securities trading policy per Listing Rule 12.10.
Unfortunately, I don’t think Dr. Phillips read it.
Over to you, ASIC.