iSignthis takes stake in ASX rival NSX

Controversial tech stock iSignthis has announced a deal with Australia’s second largest stock exchange, the NSX, that gives it a cornerstone stake in the bourse and installs it as a key technology provider.

The two ASX-listed companies will create a joint venture that will handle the registry, settlement and clearing functions at the National Stock Exchange operation using blockchain technology.

ASX-listed iSignthis will buy a signficant stake in rival bourse NSX as part of a joint-venture arrangement. Credit:Peter Braig

iSignthis confirmed to The Sydney Morning Herald and The Age that it will not seek to list on the NSX to circumvent the ASX trading suspension which has been in place since last October, as the ASX and the Australian Securities and Investments Commission conduct inquiries into its business.

The iSignthis announcement to the ASX on Thursday said it will take a 13 per cent strategic investment in NSX via a $4.2 million placement at 14.5¢ per share.

NSX will seek shareholder approval to raise an additional $3.8 million to $5.8 million, a move which gives iSignthis the option of lifting its stake to 19.9 per cent.

“We are excited to be working together with NSX to develop a platform that will significantly increase NSX’s attractiveness to the broking and investment banking community, as well as private organisations that intend to go public via IPO,” said iSignthis chief executive John Karantzis.

“With this investment and iSignthis’ technology platforms, we have the capability to develop an Australian version of the Nasdaq and become a competitive alternative to the ASX,” he said.

ISignthis shares remain suspended having last traded at $1.07. NSX shares, on the other hand, more than doubled after the announcement to a high of 28¢ Thursday afternoon before closing at 21¢.

NSX acting chief executive Thomas Price, who was appointed chairman on Thursday, said the joint venture with iSignthis "allows the NSX to expedite its plans to transform its licensed exchange market".

NSX will contribute up to $3.8 million cash into the joint venture, while iSignthis will provide its technology and services.

Earlier this month, NSX was forced to respond to an ASX query as to whether it had sufficient cash to continue funding its operations due to continuing cash outflows.

ISignthis has legally challenged the ASX’s trading suspension alleging a lack of procedural fairness.

The ASX is looking closely at the company's June 30, 2018 financial performance report, which resulted in hundreds of millions of dollars worth of shares being awarded to iSignthis insiders.

In November, iSignthis was forced by the ASX to admit it made a “mistake” and misclassified most of its revenue for the contentious half-year period ending on June 30, 2018 as recurring when it was non-recurring.

The mistake could have significant consequences for iSignthis, which was warned by the market operator that such errors could be a criminal offence under the Corporations Act.

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