When you got an experienced management team, as well as independent directors such as Paul Walsh from Diageo and Lord Rose (formerly Stuart Rose from M&S), along with a famous investor in Neil Woodford, whom fund holds the biggest stake in the company (35%).
You think you are on a winner.
Instead, RM2 is one of the worst performers in the market. Since January 2014, the shares collapsed from 88 pence to 14 pence.
Worse still, the company wasted hundreds of millions of pounds by initially pursuing the wrong strategy. Despite this, it needs hundreds of millions of pounds to meet the terms of agreements with their new outsourcing partners.
If you think the share price of 14 pence is cheap, do some research before taking a punt on this stock.
Here are nine to consider: -
An ONE Product Company (Red Flag No. 1)
RM2 has one “high-tech” pallet product called BLOCKPal. However, high-tech this product possesses it’s still a pallet. Secondly, the price of industrial pallets aren’t expensive, you can buy pallets on eBay and on Alibaba.
With prices at single digits, this makes BLOCKPal pallet (with a tracking device) looks expensive to rent and buy.
On top of that, RM2 is in collaboration with AT&T to develop a new tracking device pallet called ELIoT pallets.
We know the product is real, but can they sell enough of it to make RM2 a self-sufficient business.
Manufacture First without Testing the Market (Red Flag No. 2)
When the company raise £130.8m in net proceeds, investors should question the business model.
As a fan of Shark Tank (the U.S. version of Dragons Den), the one question they always ask “wannabe” entrepreneurs are: “What are you going to do with my money?”
And, if the reply is: “I will use it to manufacture and stock up on goods.”
Then, the reply is always the same: “Do you have the orders coming in?”
And, if this turns out to be NO, the sharks will start ripping into their business model (no pun intended).
Apparently, that was the mistake RM2 International has made and they paid a price with their reputation, along with going down the drain.
Even worse, they decided to…
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