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Milestone – why does it always hop into bed with technically insolvent partners?

By Tom Winnifrith | Monday 12 February 2018

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.

Milestone Group (MSG) has announced a memorandum of understanding with Seed Media Limited and Martin Heath with a joint venture that is intended to be owned 50.5% by Milestone. The proposed deal has two things in common with the proposed deal with Black Cactus namely that underlying technology to be used is Blockchain and the fact that Seed Media like Black Cactus is technically insolvent and loss making.

A visit to Companies House reveals that Seed Media had accordingly to its unaudited financial statements at 31 January 2017, a deficiency of £1,712,970 in net assets up from £656,801 from the previous year. The company is clearly racking up losses and burning cash and since the year end entered into two charges with Barclays Bank.

On 11 September 2017, the company entered a debenture providing a charge over the assets (not actually that significant at £179,374 at 31 January 2017) of Seed Media. On 27 September 2017 it also provided security over a property in Notting Hill (not owned by Seed Media).

Surely Milestone would want to protect its joint venture by ensuring that the joint venture partner is in robust financial health at the start of the arrangement? Or is it simply so desperate to make announcements that either it doesn’t perform due diligence or it simply ignores the results when it does so?

Of course Milestone is itself 99% of the way to the graveyard at the end of tits up alley so maybe its just that birds of a feather...

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