Gorgeous blond CEO, co-founder quits. Frumpy
brunette co-founder left to rock in cubicle…
Do the machinations of business confuse and
fascinate you as they do me? My favourite, at least in
recent memory, was Quiksilver emerging from the cocoon of chapter 11
bankruptcy $US600 million lighter in debt.
It’s like a magic pudding! Pour your cash away on any
ill-advised venture and it… don’t matter a thing!
A wise business gal once advised me to identify companies
throwing cash around and to attach myself to its teat and suck the
bejeezus out of it until it dried up. Oowee! Did I ever tell you
about the time me and a pal got a company to pay $350,000 (in 2003
dollars!) for a book that fed us a quarter-mill in profit? And that
Stab was born with the proceeds? And that we made so many
bad decisions we ate up the money in a year?
In the early 2000s, it was Billabong with the blank checks.
Lately, it’s been online retailer SurfStitch.
Do you remember last May when SurfStitch spent $13.8 million in
cash and 4.8 million in shares buying Magic Seaweed and Stab? Or four months
ago when they threw $23 million at FCS?
So much floral extravagance!
And the adventure continues.
Just a few hours ago, the CEO and co-founder, Justin Cameron,
quit his gig “to join forces with a private equity group, in
preparation for a possible bid for the company.”
Meanwhile, the other co-founder of SurfStitch, the brunette
Lex Pedersen, has been left to rock to and fro in his cubicle!
Blood feud?
In The Australian newspaper, Eli Greenblat
reports: “Left stranded is Mr Cameron’s surfing buddy
and fellow SurfStitch co-founder Lex Pedersen, who remains at the
company as managing director in charge of its North American online
business Swell. The pair grew up together on Sydney’s northern
beaches, dreaming of starting a surf retailing business. By
December 2014 they joined hands to yank the piece of rope that
hangs from the Australian stock exchange’s golden bell for their
company’s $83 million initial public offering.
“They were obviously mates, dressed casually, beaming for the
cameras with a surfboard leaning against the wall. They had lost
none of the enthusiasm or camaraderie born from years toiling away
in Mr Cameron’s garage, where the two surfing buddies began
building their dream company nearly a decade ago.
“Now Mr Cameron, a finance executive who worked for top
investment banks such as Credit Suisse and ABN AMRO before he
dumped his classy suits for scruffy jeans and T-shirts, is out and
in the hunt for his old company without Mr Pedersen.
“Surfers have been known to get into violent punch-ups over
accusations of being burnt, or having another surfer drop in and
steal their wave, now at SurfStitch it will be private equity
raiders, lawyers and merchant bankers puffing out their chests and
bracing for a rumble.
“Shares in SurfStitch rallied 22 per cent on expectations of a
possible takeover bid led by Mr Cameron and his new private equity
buddies, and later closed 13c better, or 11 per cent, at $1.31.
“According to sources close to the negotiations, Mr Cameron and
his backers, are preparing to pitch any privatisation bid between
$1.80 and $2 a share.
“The move to buy out the company comes amid growing frustration
from some institutional investors who have questioned the
valuations paid for recent acquisitions.
“Clearly there is blood in the water. Mr McDonald, the
SurfStitch chairman and former chairman of department store Myer,
told of his personal disappointment over the way Mr Cameron handed
in his resignation. For Mr McDonald, who will oversee the
day-to-day activities of the company until a new CEO is found,
there are traditions and standards that matter in the business
world.
“SurfStitch said Mr Cameron had resigned within a fixed two-year
period and before his contract allowed, possibly opening up a fresh
battle over his entitlements that could turn into a legal
brawl.
“‘Half the expertise of the company just walked out the door,’
said one fund manager.
As reported by The Sydney Morning Herald, “The founder
and chief executive of SurfStitch, Justin Cameron, appears to have
gone rogue. In a bombshell
statement on Thursday morning, the company that was
floated less than 18 months ago said Cameron had resigned and as a
result of a conflict of interest – one which the
SurfStitch board soon ascertained was a plan to lead a
private equity-backed buyout…
“Until last month, SurfStitch was one of the
market darlings – having listed its stock at $1, and
then more than doubled that price within a year. But the
euphoria bubble burst in February when the company backed away
from its bullish full-year earnings target, and told investors
instead that it wanted to invest in growth.
“The shares plunged 40 per cent to a low of $1.07. Cameron
and his co-founder Lex Pedersen, however, were somewhat
insulated from the fall, having sold 10 million shares
in August at $1.77 a share – almost half their
stakes.”
And,
“The less buoyant share price of recent weeks presented an
opportune time for predators to take a look at the company, which
had previously been trading at extreme price earnings
multiples approaching 50 per cent. Last April, Cameron said
he was aiming to lift revenues fivefold in five years to $1 billion
by growing the company’s business in Australia, North America and
Europe, expanding into new markets in Asia, and grabbing a larger
share of the global action sports market. He even described
the company as a kind of niche Amazon.”
And, again, from The Australian:
“It comes as SurfStitch is radically changing its business
model, shifting from a pure-play online retailer that sells a large
range of boardshorts, surf gear and action sports equipment to a
business more focused on content after recently shelling out more
than $20m on online portals such as Swell TV and Magicseaweed.
“SurfStitch’s powering share price, which late last year hit a
record high of $2.09 against its IPO issue price of $1, crashed
more than 40 per cent last month when the former market darling
walked away from its earnings guidance and investors dumped the
stock.”
What do you think?
Is SurfStitch an Amazon-like juggernaut, merely at the
beginning of its upward arc?
Is it a shooting star riotous with brilliant colours but,
ultimately, doomed to crash in an ocean of debt?
Or do we see the classic story of the popular blond triumphing
over his less attractive mousy-haired pal? Oh I know the
feeling!
