Oh forgive the lateness on this reporting. I was flying back from Mexico yesterday etc. etc. and feel very badly for not being first to market on the revelation that the World Surf League just completed purchase of the Titans of Maverick event and got it for a song.
Jake Howard of Stab beat me to this punch though his write up is boring seeing as he didn’t defame any fathers of young big wave surfers. There wasn’t even any high horse moralism. A total bummer.
So allow me to take over!
The WSL just agreed to purchase the permits for the Mavericks contest from Griffin Guess, the owner of Titans of Mavericks, and for 1/2 price.
And other funny things in collapsed online retailer's annual reports…
A BeachGrit reader raised a very good point last night. Why do we give only a cursory coverage to the SurfStitch slow-motion collapse and leave newspaper biz writers to lick the sweetest meat off the bone?
Is it laziness or an ineptitude when it comes to understanding the machinations of business?
A little of the former, mostly the latter.
This morning, therefore, I examined the two annual reports of the SurfStitch Group since it went public in late 2014.
And, oowee, the magic contained within.
Did you know, for instance, that in the 2016 financial year, SurfStitch made two ten-year agreements with Coastalwatch and its various companies whereupon “Coastalwatch would provide a link on its website to SurfStitch Group’s Australian website for a fee of $8 million”
Read that again.
Eight mill for a website link.
I’m not an independent valuer but eight mill would buy the entire Coastalwatch website, with substantial change, no?
The series of agreements with SurfStitch and Coastalwatch (and Three Crowns Investments and Coastalcoms) were so odd, at least to the layman’s eyes, it hardly seems surprising they now form part of a legal battle.
Here are the agreements, millions being tossed back and forth.
the content of SurfStitch Group’s media assets was licensed to Coastalwatch for a licence fee of approximately $20.3 million, receivable by the Group in April 2016;
TCI gave SurfStitch Group branding rights to certain of TCI’s apps for a term of ten years for a fee of $2 million, payable in February 2016 by SurfStitch Group to TCI, plus TCI acquired rights to advertise and distribute its brands on SurfStitch Group’s platforms (for 15% of the recommended retail price plus additional fees) for a period of ten years.
And there’s the eight mill for a link on the Coastalwatch website.
In summary, Coastalwatch and the others would pay twenty mill to SurfStitch over ten years and roughly the same amount (US$9.7 million plus $10.5 million) would be paid by SurfStitch to Coastalwatch and co over the same period.
Do you get business? Why the money-go-round?
Yesterday, SurfStitch’s “failed acquisition strategy” was blamed for its current woes.
Again, examining the financial reports we see that Garage Entertainment, which has since been sold, was bought in 2015 for two-and-a-half mill in cash and almost eleven mill in shares (that’s when shares traded at $1.91 apiece. If trading hadn’t been subsequently halted and the company put into administration the shares at seven cents would be worth 750k.)
Stab magazine aka Rollingyouth was bought in May 2015 for “cash consideration of $2,263,000.” At the time of sale, the company carried 774k in assets (including 20 grand in the bank) and 491k in liabilities.
Magic Seaweed was bought at the same time for eight-and-a-half mill.
What else was in there?
Co-founder Lex Pedersen ain’t exactly on the bones of his ass. His base salary for 2016 was $634,656 and various other bits and pieces for a total of $854,139.
And, now, of course, the whole damn thing is in administration and shareholders face ruin.
Chapter 3: Or when Sam George rides in and saves the day.
(I am writing a series about Yemen because what is currently happening there is terrible beyond. My inaction disgusts me and so I am going to introduce you to to the country because… the place, people, culture all deserve to be saved. We’ll get into the meat next but just one more meander about how we all actually got to Yemen in the first place…)
My best friend, J., and I both surfed albeit poorly. I had grown up in coastal Oregon. He had grown up in rural Minnesota. But still. Once surfing truly enters a life, maybe even especially coastal Oregonian and rural Minnesotan lives, it reorients most things. Where to live, where to go to school, when to… not work and where to travel. And after 9/11 all I wanted to do was travel to Yemen and surf.
We didn’t know anything about the coastline other than what we could piece together from old maps and rare Internet posts. It seemed surfers, or windsurfers at least, had been to the island of Soqotra that hovered closer to Somalia than Yemen but information on the mainland was limited at best. J. had a penchant for ancient Islamic trade routes and could account for the country’s booming 11th century frankincense markets and what the British living in Aden during the 18th century thought about the southern Yemeni diet but nothing about surfing. It appeared Duke Kahanamoku didn’t make it that far on his “share surfing with the world” tour.
And so I concluded that no one had ever surfed the mainland. But how to know for sure?
The answer, like everything surf in the early aughts, was to call Sam George.
He of the golden bouffant and single earring. He married to surfing’s ultimate crush (Nia Peeples from North Shore). He the gatekeeper to all that mattered. He the Editor-in-Chief of Surfer magazine.
Back then surf media didn’t attract the low-lives and has-beens of today, or so it appeared. Sam George was a towering monument to earthly success, he of the linen shirt/pant/unstructured jacket combo, he of the white Ferrari Testarossa.
I don’t know that he actually drove a Testarossa but it in my Oregonian mind he did and I figured it worth a shot to contact him, tell him that I was going to surf Yemen’s mainland and ask if Surfer wanted the story.
I had never written anything in my life.
We had no idea if we could even get visas to Yemen much less travel the country.
But my operating principle since birth had been “it’s easier to ask forgiveness than permission” which is a close relative of “shoot first, question later” so I sent an email that I wish I still had. I’m certain it was filled with pompous grandiosity and ridiculous assertions. I’m certain it would be the pièce de résistance in the Asshole Museum.
Yet somehow it worked.
At first Sam George tried to push taking professional surfers with us. We told him it was too dangerous and he somehow demurred. We then told him that we needed the money up front and somehow he agreed. A few weeks later I had a crisp check from Surfer magazine in my hands for $2000.00.
Sam George responded that he was interested in hearing more about this adventure and J. and I were invited down to Surfer’s offices which were then in Laguna Beach, I think, or somewhere weird. There we met with the surf icon and he was everything I dreamed he would be. Vivacious white smile, tan chest peeking through a casually unbuttoned Hawaiian shirt. I don’t remember much from that day other than that and Sam’s single earring, J. spinning on about ancient trade routes and Sam telling us that, to his knowledge, no one had ever surfed mainland Yemen and that he would be happy to run a feature if we dare attempt. At first he tried to push taking professional surfers with us. We told him it was too dangerous and he somehow demurred. We then told him that we needed the money up front and somehow he agreed. A few weeks later I had a crisp check from Surfer magazine in my hands for $2000.00.
Never before had I felt so high.
J. hurried up and applied for an Arabic language scholarship from UCLA. He promised them he would go to a school in the capital Sana’a and study Yemen’s enviously pure strain of Arabic and they gave him $3,000.00.
But now we were also really stuck. $2000.00 was a small fortune but not quite enough for a three month traverse of Yemen. That’s how long we decided we needed. Three months. J. hurried up and applied for an Arabic language scholarship from UCLA. He promised them he would go to a school in the capital Sana’a and study Yemen’s enviously pure strain of Arabic and they gave him $3,000.00. And we were rich beyond our wildest dreams but still had no idea about how to actually get to Yemen so called our friend N.
N. was American but had grown up in Bolivia and possessed a sort of heads down dogmatism when it came to absurd ideas. He was happy to join up even though he had never surfed a day in his life, Bolivia being South America’s only landlocked country etc. And so he began searching Yemeni companies on the Internet and emailing the given contact, explaining that now three intrepid explorers were going to come and Make Yemen Great Again by surfing almost passably on their virgin waves.
And a man by the name of H. responded.
H. was, from what we could tell, the son of Yemen’s ex-prime minister. He had gone to university in America, split time between Dubai, Cairo and Sana’a, had multiple business in Yemen and had an easy manner over email, just telling us to show up and we would be taken care of. I can’t recall what N. promised in return but I think at this point we were relatively honest and thought surfing was simply the best thing ever and to do it in Yemen would be the best thing ever and not just for us. Surf tourism etc. Relatively honest and ridiculously naïve.
H. didn’t seem like he cared about what we had to offer, anyhow, and just seemed intrigued by the harebrained-ness.
And like that we were set.
Except that none of us had a camera or took pictures.
Shareholders "likely to face complete loss on their investment."
How do you solve the problem of a biz built on what is essentially a solid foundation but ruined by a “failed acquisition strategy” and facing various law suits and an investigation by the Australian Securities and Investment Commission?
Hoist a white flag and call in the administrators. It’s a way a company like SurfStitch that ain’t doin’ so well, maybe it has a viable biz but needs a little time to steady the ship, can keep creditors at bay while an administrator works out what the hell it should do, if it’s viable and so forth.
Although, as reported today by The Australian,
“The long-troubled surf and sports products online retailer SurfStitch has collapsed into voluntary administration, ending the public life of one of the worst floats on the market in recent years, leaving its shareholders likely facing a complete loss on their investment.
“SurfStitch has the ignominy of being one of the worst performing floats in recent times. Set at an IPO price of $1 when the company floated in late 2014, the shares soon crashed following a string of profit warnings, class action law suits, failed acquisition strategy and then the shock loss of one of its co-founders and co-chief executives Justin Cameron soon after its float.
“The long-troubled surf and sports products online retailer SurfStitch has collapsed into voluntary administration, ending the public life of one of the worst floats on the market in recent years, leaving its shareholders likely facing a complete loss on their investment.”
“The cracks started to show in SurfStitch soon after it floated on the ASX, with the company plunged into turmoil in March 2016 when Mr Cameron quit via a one-line email to the board, as he joined forces with a private equity firm to launch a possible takeover of the group. SurfStitch, led then by chairman Howard McDonald, had been scrambling since to regroup executives and integrate the businesses that SurfStitch bought up since its $83m float in late 2014.
“In 2015, SurfStitch kicked off an acquisition spree, as it extended its reach beyond online retailing of surf and sports goods – which was its original business model – to buy up a host of other companies. SurfStitch paid $23.7m for specialist global water board distributor Surf Hardware International and prior to that paid $21m for Stab, a leading online surf content platform, and surf forecasting network Magicseaweed. It also bought Garage Entertainment and Production for $15m.
“Many of those deals failed to deliver the returns SurfStitch had hoped for.”
“Earlier this year, law firm Quinn Emanuel filed an open class action in the Supreme Court of Queensland for anyone who bought or held shares between August 27, 2015, and June 8 last year included in the litigation. It represents a potential $100m lawsuit.
“The plaintiffs allege Surfstitch was trading at a loss in August 2015 but announced that it was expecting EBITDA to double in the 2016 full-year. Surfstitch allegedly covered up the loss by entering a series of copyright licensing deals with surf technology group Coastalwatch and Three Crown Investments.”
A meeting on September 5 will update shareholders on the progress of the administration and what sorta cut they might get out of their seven cent shares.
Terror in New England as Great White numbers soar!
What travellers Great Whites are. After establishing buoyant new colonies in Western Australia and around Ballina on Australia’s east coast, as well as in San Clemente ninety clicks south of LA, the Great White has now made a show of its arrival in New England.
Over the past few days around Cape Cod, a fisherman has filmed a breaching White, a SUP pilot was attacked in three feet of water and two surfers “feared for their lives” and the ocean was tinted a gorgeous red when a Great White hit a seal twenty metres off the beach.
The panic as a White hits a seal here. (Nisi Schlanger, who was surfing for the first time, said, “I felt like the shark’s gonna pull me in from my legs or something. “People [were] yelling, ‘Get out the water! Get out the water!’ I thought I was dead.” He said there was “blood everywhere” as the shark ate the seal.)
In response to the sudden activity, the usual calls for a cull have been thrown out. As reported by the New York Post:
A shark attack on a seal in Cape Cod has prompted a call for a controversial system that would hook and kill great whites.
Ron Beaty, commissioner for Barnstable County, believes the “shark hazard mitigation strategy” will help protect swimmers from potential shark attacks, the Boston Herald reported Wednesday.
“This shark, that attack that got videotaped off Nauset, that was very close to shore and very easily could have been a small child and not a seal,” Beaty said. “It’s very easy for these sharks to mistake a person for a seal. They’re just looking for something to eat. God forbid it’s somebody’s child, and by that time, it’s too late. We can’t wait for that.”
Under Beaty’s proposal, which he said has worked in South Africa and Australia, baited drum lines would be set up along popular beaches. Great whites that are found hooked would be shot to death, their bodies tossed out at sea.
Do you like the idea of Great White bodies being tossed out at sea? Or does it make you so mad you feel like going straight to Facebook and creating a page about it?
My favourite quote re: these events goes to the scientist Gregory Skomal who told theBoston Herald: “When you have overlap with humans, you do get the potential for these interactions, you know, a shark biting a person.”
Jon Pyzel and Matt Biolos by @theneedforshutterspeed/Step Bros