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.