Reliq Health Technologies (Reliq Health Stock Quote, Chart TSXV:RHT, OTC:RQHTF) is in dire straits as the healthcare software company faces scrutiny over its financial disclosures and a class action lawsuit on behalf of shareholders. The issues raise too many red flags, says Peter Imhof of AGF Investments, who has serious doubts concerning Reliq’s overall management.
On October 16, news broke that Reliq was intending to restate aspects of its financial information for the quarter ended March 31, 2018, saying that the decision followed an audit which revealed problems over the “timing and certainty of receiving the revenue invoiced to clients,” said management in a statement.
Market reaction was immediate, with the stock losing more than half of its value overnight. After reaching a high of $2.62 earlier this year, RHT currently sits at $0.48, down nine per cent in Friday trading.
Imhof, vice-president and portfolio manager at AGF Investments, says that while his firm did extremely well by Reliq over the past year and a half, the company’s current issues are too big to ignore.
“They came out recently and said that they couldn’t recognize a lot of the revenue that was supposedly coming through and that it would be delayed,” says Imhof to BNN Bloomberg. “There were some governance issues probably with the company. Unfortunately, we ended up selling the stock here on the downturn —there were just too many red flags. There are going to be lots of lawsuits against the company.”
This Wednesday, Reliq announced the firing of Giancarlo De Lio, the company’s Chief Visionary Officer, while at the same time reporting that it has taken on Sophic Capital as its investor relations firm.
“These changes reflect Reliq’s commitment to improving our investor communications and to ensuring transparency, accountability and execution within the organization going forward,” said Dr. Lisa Crossley, CEO of Reliq.
Imhof said, “When there’s no visibility, there are lawsuits going on, I don’t have a tonne of confidence in the overall management in terms of operations so we just decided to exit and move on.”
“Sometimes you have to do that in small caps, you have to take your lumps,” he said.
At this point, investor rights law firm Rosen Law Firm has stated that it would be filing a class action lawsuit on behalf of Reliq investors, “resulting from allegations that Reliq may have issued materially misleading business information to the investing public.”