By Tom Winnifrith | Thursday 4 May 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Dear Chris Akers. Excuses are like arseholes. We all have them. And no-one cares. And that brings us to today's announcement from your company Concha (CHA) regarding its disastrous investment in failed unicorn Ve Interactive.
Despite there being stacks of red flags Concha invested c £4 million in Ve in a £1 billion valuation, a decision which we pointed out at the time was completely bonkers.
On 27 April I pointed out HERE that Ve had gone bust and pushed Concha as to why it had not made a statement. Two have since followed and today's is laughable. The SharePrprohets Translation Service is in bold.
In March of this year, we reported that a new management consortium had been introduced to Ve Interactive Limited ("Ve") with the primary objectives of stabilising the business and executing a programme of solvent restructure. At this time, the on-going viability of the business was dependent upon the new management consortium securing the necessary funding to recapitalise its balance sheet and re-structure a number of onerous debt obligations entered in to by the former founding management team.
Ve was still guzzling cash and not paying its bills and if it was going to survive it would have had to secure funding at a level way lower than suckers such as er....Concha got in.
On 15 March, management communicated their intention to secure a minimum of £20m in new funding, from a combination of both existing share and debt holders together with new identified parties. On 7 April 2017, HMRC served a second winding up petition on the Company, the first having been satisfied by the injection of funds introduced to the business by the new management consortium a month earlier. Throughout this time, the new management team continued to actively engage with the existing share and debt holder base in order to provide greater insight in to their future plans for Ve, and assist the diligence process of all interested parties wishing to evaluate the proposed new funding arrangements. By the time of the second winding up petition, the management had secured a maximum of £13.1m in conditional new funding.
We did not bother telling shareholders about all of this at the time but then anyone dumb enough to own our shares probably had the same maths tutor as Diane Abbott so it would all have gone over their heads anyway.
As a result of this action, the timetable afforded the new management team in concluding its fundraising was accelerated and in the absence of having secured the necessary funding required to meet the short term needs of the business going forward, Smith and Williamson were formally engaged by Ve on 13 April 2017 in preparation for an insolvency appointment over Ve.
Natch we did not bother announcing this at the time even though Ve was our dominant investment.
On 24 April 2017, an application to the Leeds District Registry of the High Court, to be heard the following day, was made by a creditor seeking to place Ve into Administration. On 25 April 2017, Smith and Williamson were appointed as administrators to the company. Later that same day, as part of a pre-packaged arrangement, the business and assets of Ve were sold to Rowchester Limited for a cash consideration of £2m, payable in instalments over a 12 month period ending April 2018. The directors of Rowchester Limited comprise members of the incoming Ve management consortium.
The Board of Concha is deeply disappointed by the recent events and circumstances of the last few months, particularly the actions of both the founder management team and their advisors. We together with other former shareholders in Ve, which in combination have advanced more than £50m in equity funding since the company began trading in 2009, will continue to investigate the actions of those responsible for its demise and indeed any opportunity to participate in the assets and business of Ve going forward, however at this time there can be no guarantees of any such involvement.
Concha made a diabolical investment on a crazy valuation but we would like to make it clear that losing so much of other people's money is in no way our fault and we would like to blame everyone else. In fact the underlying investment was so brilliant that we'd like to get another chance to spunk shareholders cash on what is a proven failure of a business model. Better luck second time around eh?
The impact of these recent events has eliminated any residual carrying value in Concha's former investment in Ve. In the event that this situation changes and Concha is either able to secure a participation in the new business going forward or recover value from its former investment it will communicate details at the appropriate time. In the meantime, your Board will continue to review new investment opportunities in order to restore value for its shareholder base.
Natch we will not give you any hard details on the current NAV although it is probably closer to £1 million than £1.5 million. There is no chance of us recovering any value from the old Ve but lets string shareholders along and see if anyone is daft enough to believe either that or that we can restore value though other great speculations.
Amazingly this spoof has worked. The AIM Casino listed shares are up sharply at 0.17p valuing Concha at £2.8 million a mammoth premium to NAV. that is not justified. Sell..
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