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.
Oddly enough they did not like paying for surf photos. They figured surf photos should be free
Those guys were epic tools. Everything they did seemed just dumb. Everything they bought went to shit. They were most excited that cocaine was like half the price as in Australia. Which seems odd what with all the Money they were throwing around. They were a very confident bunch.
And finally, what does the current board and senior management think of the blonde genius’s Magic Stabweed integrated media synergy strategy?
“The integration of these opportunities has been slow and there has been lower than expected benefit gained from this integration. As part of the on-going strategic review announced in July 2016, management have concluded that the expected integration benefits will not likely eventuate in the foreseeable future.”
That’s corporate speak for … faaaaaaaark.
What about the bit where you can see how much two “Rolling Youth employees” scored in options?
$2,437,836 for one of them (for a two-year lock in) and $595,389 for the other (three-year lock in). As luck would have it, SRF shares fell off a cliff just before the first tranche vested on May 22, 2016. By the time the second batch came around, they were virtually worthless. So the real purchase price to SRF shareholders has dropped significantly.
Takes a little of the pain away from shareholders at least, when they think of how much value has been shaved off that particular liquidity event.
But Bitchy Crab, did you see the bit where they ordered an independent valuation of Stab? Result: the value of its goodwill (those shitheads with no “purchasing power” on the comments forums, basically) had declined by $918,000 in the first year? Wowee.
Total value at June 2016: just under $2.1m, apparently.
Even with that 50% write-down in goodwill, methinks the beancounters are still being a little over-exuberant.
Oh yeah, and the writedown on Magic Seaweed was even worse … $3m in goodwill torched 12 months. Never looked but can their commentariat really be any worse than Stab’s?
Sounds like playing with rich people’s money to hook a bunch of friends up. Surf industry truly is a band of brothers (with no ethics).
Fuck beach grit I’m out. Your Killing my interest in surfing.
Holy shit. This is amazing.
1. Who would ever do a 10 year deal in the Internet space? Shit changes so fast. What works today might work for the next 15 months. Maybe. Definitely not 10 years.
2. Assuming you’re smart, you’d only do a 10 year deal if you had definitive proof it was a solid deal. And then, of course, you wouldn’t be out of business.
3. $600k is a healthy salary even by Silicon Valley standards. Hard to imagine this clown was deserving of such a salary. Obviously he was not.
Hold the fucking phones though, talking about ad revenue.
I have double banner at the top of comments here 1 in middle (never seen before!!!!) and 1 at end!!
The “grit must be killing the revenue as the others fold
Very very smart boys!!!!
Aha! That is uncanny timing!! Speaking of smart, that’s Disqus putting those adverts into the comments.
Disqus was a free platform to use up until a month ago… but unless you upgrade your account ($10per month for the most basic plan) your website gets stuck with these adverts.
funny I started looking into it after I posted that and suddenly thought it was Disqus
was good timing though no?
It’s on my site too.
Rate my Turd?
Just use Brave browser.
Soon these guys will start getting paid by us with crypto currencies
This mirrors Enron in many respects.
http://www.investopedia.com…
Didn’t they snatch up O’Fish’L fins for somewhere in the neighborhood of $10 million US?
Those fins go so good on my 8’0″ Bic Peter Pan model….
Dez I think you missed a few things in your thorough research for this article. The whole damn thing isn’t in administration at all, just the shell companies.
The trading company is continuing as usual, which means all of the subsidiaries are continuing business as usual.
The voluntary administration move just looks from the outside like it’s a move to dump the shell companies and let them take the hit for the class action that they are obviously expecting to lose. That very fact by inference must mean that they are most probably guilty of what they have been accused of, or that they can’t adequately defend the case that they aren’t guilty.
You want a scoop, then there it is!
Don’t just give us the annual reports and think that you are now some kind of Fred Pawle! Dig!
Even in my most ambitious fantasies I could never ever imagine being in the same classroom as Fred Pawle. Voluntary administration, however, means, I think, a biz can trade as usual while being gifted a little breathing space between the troubled company and its panicked creditors.
By your use of commas above, I would put you in the same classroom as Fred, but as the teacher.
Disclaimer: my lack of understanding of the business discussion in this article has me outside that same classroom sharing needles with Noa’s First Needle.
OK, we need to find the next surfstich willing to fork 8 mill for a link for the Grit.
Cant we all get done with this ridiculous pantomime and all start wandering the byways with our stuff in shopping trolleys fighting over roadkill?
Hopefully the entire Beachgrit community will be rewarded for their contributions and compensated for their losses.
who do you reckon has lost the most?
Probably whoever had employed Negs to plumb
Building a house of cards should always remain a children’s game at the card table, not imbedded in a business plan.
Although I was unable to read the article as i’m business illiterate and my eyes glaze over when i see numbers, dollar signs and words like ‘pays’, it seems like Derek has put a bit of effort into this one and I hope the loyal followers recognize and appreciates this.
I didn’t even read your comment yet, just your name made me spit out tea on my keyboard….
It’s the name we all wish we had thought of first
You are are great cheerleader but damn, Nfn, what kind of mainstream Sesame Street website are you on to read the previous article “hours before” but lack the reading comprehension to follow this? Maybe they’ve got a 5th year version for you over there. I did give you an up vote though cause I’m just pulling ya chain.
wasn’t Deloitte their accounting firm? oh, KPMG. maybe start there.
I bet the surfstitch offices at the time they had their massive buy up, looked something like this. https://uploads.disquscdn.c…
Oh you’re back! I hope you don’t mind if I use this…
ill sell you a link for 7mil… bargain…
Is that all! Can you imagine the rates for photo usage! In other news, Coastalwatch, I’m told, has axed their photo and video budget indicating, perhaps, the eight mill is yet to be paid.
It was a stitch-up!