$AT / 0072 (AT SYSTEMATIZATION BERHAD): Keep Doing Corporate Exercise around Right Issues and Stock Consolidation

AT Systematization Berhad once a hot stock during the pandemic. It is due to the company announcement to venture into the glove industry. But at the same time, it is also a stock with bad reputation as $FINTEC / 0150 (FINTEC GLOBAL BERHAD) once is its major shareholder. Even though FINTEC no longer its major shareholder but its operating is still bad and operates like FINTEC which holds shares in bad performed penny stocks like $AEM / 7146 (AE MULTI HOLDINGS BERHAD), $TRIVE / 0118 (TRIVE PROPERTY GROUP BERHAD) and $DNONCE / 7114 (D'NONCE TECHNOLOGY BHD). While its performance much worse, keep losing money and bleeding which causes it do a lot of corporate exercise to raise money.

Its corporate exercise start from 2013, the company proposed a 1-for-1 rights issue with 1 free warrant, pricing each rights share at 10 sen, raising approximately RM20 million. Then, in 2016, there was a 2-for-2 rights issue with 1 free warrant, pricing each rights share at 6 sen, raising RM26.1 million, followed by a 3-to-1 share consolidation in 2017.

Even after the capital reduction, the problems seem far from resolved. AT's cash burn rate is extremely fast, but despite burning through cash, their performance remains invisible. While one side consolidates shares, the other side is raising funds again, proposing a 2-for-4 rights issue with 3 free warrants per rights share. This time, each rights share is priced at 3.5 sen, which is even cheaper than before.

Don't forget, this happened after the 3-to-1 share consolidation. After the share consolidation, the price actually became cheaper. The minority shareholders who had previously invested in Rights Issue 1 (10 sen) and Rights Issue 2 (6 sen) could almost foresee that it was unlikely they would recover their hard-earned money. Currently, the options are either to cut losses or to reinvest in Rights Issue 3 in hopes of averaging down the price.

As a result, Rights Issue 3 successfully raised RM34.7 million, more than the funds raised from the previous rights issues.

By 2023, shareholders who had held on to a glimmer of hope realized that describing their investment as "disastrous" was an understatement. The 3.5 sen price could still be trampled 30 times over. The company announced a 30-to-1 share consolidation. Those shareholders who were unwilling to cut their losses in 2020, thinking the company might have a chance at a turnaround, now understand what a journey through hell feels like.

The strangest thing is that after three rounds of fundraising, raising a total of RM80 million, the company managed to lose it all within ten years. Bursa Malaysia has allowed it to repeatedly ask shareholders for money and then lose it all again. Could it be that the company foresaw its troubles and raised funds through rights issues to avoid falling into the PN17/GN3 category?

Judging by the company's current state, it seems likely that they will need to raise funds again in another two years; otherwise, they might fall into the distressed category. With the funds from the three previous rounds disappearing without a trace, can they blame the bad market conditions? What story will they prepare to convince shareholders for the fourth round of fundraising?