DIGICUT has announced that the collapse of GN Savings and Loans has locked up nearly 50% of the proceeds from its IPO, which was conducted in the first quarter of 2018.. The funds were placed with the GN Savings and Loans, which faced challenges that resulted in the revocation of its licence by the central bank. Please the narration by the company below.
Digicut Production and Advertising PLC (Digicut) is a full-service advertising agency and public relations consultancy. It made its debut on the Ghana Alternative Market (GAX) on April 11 2018, raising GHS 2.9 million as part of its initial public offering (IPO). A portion of the proceeds was used to retire old company debt, while the rest of the proceeds (specifically, GHS 1.4 million) was placed on a call account with GN Savings and Loans (GNSL, previously GN Bank).
In 2019, Digicut ran into cash flow challenges as several clients were not able to pay their outstanding receivables. The company was also unable to access the GHS 1.4 million of its IPO proceeds placed with GNSL due to the bank's liquidity challenges, which was further compounded by the revocation of the bank's licence by Bank of Ghana in August 2019.
The company’s tight cash-flow condition was exacerbated by the corona virus pandemic (COVID-19). The lockdowns of Accra / Kumasi, and later the whole country, brought Digicut’s business to a standstill in the second quarter of 2020. On the back of the above difficulties, Digicut placed almost all staff on indefinite leave effective May 2020.
Efforts by management to recover the company receivables and locked up IPO proceeds have not yet been successful. However, we are positive that these will be recovered for the benefit of the company and its objectives. These and other difficulties had also affected the timely completion of the 2019 company audit.
There have been several recent developments at Digicut to turn the operations and finances of the company around positively.