The Douugh Ltd (ASX: DOU) share price has been suspended for a couple of weeks and investors were finally told why today.
In a separate announcement, Douugh confirmed reports that it has signed an agreement to acquire investing app Goodments for $1.5 million in shares.
What did Douugh announce?
Douugh's shares have been out of action since 21 December. This was initially due to a trading halt that was requested while it prepared an announcement relating to the Goodments acquisition.
However, on 23 December, an extension was requested while it prepared a response to a query from the ASX. Despite requesting further extensions, no details were provided on what the ASX was querying. Until now.
This afternoon Douugh revealed that the ASX has identified potential ASX Listing Rule 10.11 breaches in its recent placement and in the backdoor listing transaction. Douugh landed on the ASX via a reverse takeover of ZipTel in September.
What is Listing Rule 10.11?
The ASX explained the rule on its website. It is as follows:
"Listing Rule 10.11 effectively requires an entity to obtain the approval of the holders of its ordinary securities before it issues, or agrees to issue, any equity securities to a related or other closely connected party unless the securities are issued under an employee incentive scheme with the approval of holders of ordinary securities under Listing Rule 10.14; or another exception in Listing Rule 10.12 applies."
The stock exchange operator advised that the rule is in place so that a "related or other closely connected party of an entity is not in a position to influence whether the entity issues, or agrees to issue, equity securities to them, as well as the terms on which the issue or agreement is made. The harm it seeks to protect against is that the related or other closely connected party will exercise that influence to favour themselves at the expense of the entity."
What now?
Douugh was given until 4pm on 6 January to deliver its response to the ASX but has been granted an extension until 8 January. It explained that this was to allow the company to complete an independent review of the backdoor listing register.
Management advised that its shares will remain suspended pending the outcome of the ASX's queries.
Goodments acquisition.
Douugh has revealed that it has signed an agreement to acquire investing app Goodments for $1.5 million in shares.
Goodments currently has 12,700 customers and an average of $6,000 per active investor of funds under management. The release does not clarify whether all 12,700 customers are classed as active investors.
Completion remains subject to the satisfaction of a number of conditions such as due diligence by both parties and relevant approvals.
