Boutique fund manager Contango Asset Management, which at last report had negative a quarterly negative cash flow of $502,000, is in negotiation with its lenders.
The ASX has pinged the investment company, saying the latest cash burn rate may indicate Contango “may not have sufficient cash to continue funding its operations”.
Apart from the negative operating cash flow, the ASX also noted that the company’s cash at the end of the June quarter totalled $819,000 and that the estimated cash outflow for the next quarter was $2.206 million — a significant gap in funding.
The ASX asked if the company, which debuted on the exchange in September last year, had taken any steps to raise further cash to fund its operations.
Cornerstone investors in Contango are billionaire James Packer and Rob Rankin, the former chair of Packer’s listed Crown Resorts, via Pacific Point Partners which holds 19.9%.
This holding is aligned with the management team lead by managing director George Boubouras. Financial commentator Peter Switzer also has a stake.
Contango told the ASX that the cash flows are in line with long term strategy and reflect investment in key staff and the continued expansion of the company’s operating platform.
Negative operating cash flows will continue for the time being, it says.
“The company is currently in the process of renegotiating and extending its financing arrangements for its ongoing operating requirements,” Hari Morfis, the company secretary wrote in reply to the ASX.
“The terms of the financing are incomplete and not able to be released to the market at this stage. The company has every reason to believe these steps to be successful and will provide material details to the market at the appropriate time.”
At last report, Contango had $752.6 million in funds under management and says it is actively pursuing new institutional and wholesale mandates to increase funds under management.
To December, Contango posted a loss of $2.648 million. Revenue for the three months was $1.441 million.
In June this year, Contango Asset Management raised $99.75 million for a separate listed fund, Contango Global Growth Limited.