Toople (TOOP) will make its debut on the London Stock Exchange on 10 May, although investors should be cautious as we find it hard to justify the £8 million market valuation.
The firm plans to sell broadband solutions to a target market of 5.4 million small medium enterprises (SMEs), but so far only has 41 customers, which represents a huge gap between realistic and ambitious targets.
While stricter competition rules may provide the company with an opportunity to become profitable, its lack of trading history and cash resources are concerning for potential investors.
On admission, Toople expects to have cash resources of £1.66 million; this is the proceeds of a £2 million fundraise to accompany the IPO, net of expenses.
The company plans to heavily invest in online marketing to boost its brand awareness in order to attract more customers, but there is no guarantee that this will translate into a larger client base.
Furthermore, Toople’s strategy to sell multiple products to clients at competitive prices will be difficult without a strong brand or reputation in an intensely competitive market.
Another red flag is that the organisation may struggle to upgrade its products and services, rendering the possibility of its offerings becoming obsolete in the future.
It hopes to pay dividends but will only do so once it is a commercially viable business.
The major shareholders are the founder David Breith, chief executive Andrew Hollingworth and head of sales Matthew Donaldson.
Breith started his telecoms career in 1994 and was one of the founding members of O-bit Telecom. He joined the board of Coms (COMS:AIM) as CEO in 2013.
Hollingworth has worked in the telecoms industry for 25 years and was director of wholesale at TalkTalk.
Donaldson, David Breith’s nephew, has worked at O-bit Telecom, Channel Telecom and Coms before joining Toople.com last year.