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Hi justthefactsmam,

The 'sleight of hand' - if that is what it is - is all the more surprising when SYME appears to have done a financing for these people
https://www.tascadalmerita.it/en/,
who seem pretty 'high end'.
I can't find a link to the SYME-specific article, which was on a wine-club website, but did find this more generic reference :
https://www.finextra.com/blogposting/15016/blockchain-in-the-supply-chain-use-cases-inventory-finance

Camerinelli is a SYME NED.

ATB
This looks to be a pretty high end operation

Hi all,

Today's RNS shows us a bit of leg, but leaves as many questions as answers.

(1) the rise in 'Gross origination' Client companies is acknowledged as being because SYME 's credibility as being able to source funding is improving. Against this, there's implied recognition that the Captive Bank is unlikely to be a factor until next year.

(2) EPIC appears to have performed, the 1 x Italian self-funder hasn't ( its 272 new Client companies that were 'currently undergoing SYME's rigorous assessment and due diligence processes' 2 months ago are unchanged, and SYME has yet to start due diligence on the initial 29 it reports it has since selected ). No update (=no news ?) re the 2nd Italian self-funder.

(3) It's unclear whether the Core Portfolio sector analysis is based on the 142 Client Companies or the Euro 300M first Inventory Monetisation portfolio. With 30 x entities, this SUGGESTS - but doesn't necessarily mean - an average Euro 10M, which would be in line with target Euro 15M.
These companies are NOT the 'household names' headlined, but suppliers to them, as both the wording "corporates of various sizes which form part of supply chains led by the following companies..." and a moment's reflection would make obvious.

(4) There's no update to StormHarbour 's 'inventory-backed note programme' , no change reported from the 30 June position of 16 'interested' II's , mostly global asset managers; and - by silence/implication - no developments re the large UK financial institution's inventory monetisation pilot programme . To be fair, the July update was to start the PILOT by the end of 2020.

(5) There's a further bit of 'flesh' in the Financial contribution :
- Period ending Sept 2020 : 'Revenue' said to be approx "£ 2.3m. Deduct the £416K (NPAT £ 26K) reported to 31/3 and you have NewCo related revenue of £ 1.9M. This appears mostly to derive from the 'client on-boarding processes'. It's not clear from which batch(es) of Clients this has come....or whether these fees are ADDITIONAL to the quoted 'service fee' or a downpayment against them - if the latter, you need to reduce revenue taken in subsequent year(s) accordingly.
- Period ending Sept 2021 : based on Euro 300 M and FX Euro :£ of 1.1, SYME says that it expects the first portfolio to provide Euro 22.5M = 7.5% (gross) return to funders and Euro 7.15 M = 2.4% net to SYME, annually over the 3 year life. On the face of it, this is an all-in cost of 9.9% pa (before, maybe ? onboarding fees, see above) to the Borrower, which seems exorbitant and uncompetitive....unless clients are more distressed than the co's SYME is targeting ?
- OTOH, maybe SYME means its earlier modelled 7.5% all-in , of which 5.1% towards funding and 2.4% (+/- the 'onboarding fees' to SYME....?
With so many uncertainties , it would take a brave person to do a meaningful extrapolation.

Like any good strip-tease, the punter's been left wanting more....;->

ATB

Hi Infapound,

https://www.supplymecapital.com/wp-content/uploads/2020/03/2020_03_04_Prospectus-posted.pdf

HTH

Hi G_G_G,

Glad to hear you're feeling perkier !
Like you, I deleveraged a bit ...but in my case involuntarily as I'd left too tight a stop on my recent top-up ;-<

... "It's the punch you don't see coming that always does the most damage...."

or , as Mark Twain put it, .."“What gets us into trouble is not what we don't know. It's what we know for sure that just ain't so.”

Onwards and upwards !
ATB

Hi futuresbright,

.."The model however, recapitalizing a bank to reinvest deposits in asset-backed inventory is, from my perspective, a rock-solid move..."

I think your description is an oversimplification. A 'rock solid move' would be the recently described Jiko bank deal, where a 3 branch Minnesota bank was recapitalised and then customer inflows swept daily into/out of shortdated US Government Treasuries.

In SYME's case, I think the regulator will be concerned at a recapitalisation that is used to attract depositors to invest in products that - by virtue of the platform and captive bank - are originated, structured, managed , in the custody of, overseen and sold by essentially the same connected group of people.
With the best will in the world, that leaves - IMO - an undesirably large number of potential points for failure.

Put this way, if this was available at a 'retail' level - and bearing in mind the above - would YOU invest a meaningful amount of money for a 2-3 % annual return ?

ATB

Hi all,

The article from a Euromoney subsidiary is 'meatier' than most, SYME PR-generated 'puff pieces' for the most part.

From this we learned :
- that there are 4 distressed banks in the frame to be taken as a 'pure captive lender' ;
- that target customers will be non-investment grade (but not 'distressed') and will receive 85% - 8% = 77% of the value of the inventory. This doesn't square with the 100% + VAT that has been asserted previously as one of the product's attractions.
- the article states that.."Existing liabilities and deposits will stay in place, funding the investments into captive..." They are only available if the matching assets (loans) are repaid, which seems unlikely if the banks are 'distressed'. So new funding - to be directed to SYME-originated/sourced business will have to come from fresh liabilities. So the re-capitalisation is key.
- we're also told that ..". Supply@Me intends to move from a single tranche structure [ which allows the deal to fall outside the European Securitisation Regulation ] to a more usual securitization approach when the bank deal is closed, with the bank anchoring the junior notes and co-investing with third parties in the senior tranches ".
- from "With these elements together — tranching and external ratings — the firm hopes to cut costs to its companies down to 4%, making use of the product attractive to firms that have access to lower cost capital", SYME's 'net' is also likely to fall, surely ?
- a tiered risk/reward structure - duly supported by external credit rating agencies (3) - is , by implication, and acknowledged by both the journalist (Trafigura example) and AZ ("“We know there are a few players that typically manage a single name transaction with a large corporate, a bespoke transaction with a longer lead time.”) an added complication to an already complex concept. IMO, there will be slippage to AZ's ambitious time-line;
- CB regulators will be mindful of the risks (if they remember anything from the GFC) ...and fellow CB Bundesbank's recent chastening experiences with WireCard and the challenges posed more recently by fellow working capital fintech Greensill, mentioned approvingly by some here as a potential model for SYME.

A quick google of Greensill highlights issues that regulators/auditors will be (or should be !) sure to look at :
- https://www.pymnts.com/news/b2b-payments/2020/greensill-faces-swath-supply-chain-finance-defaults/
- https://ftalphaville.ft.com/2020/08/19/1597828155000/-System-generated-truncations---Greensill--Gupta-and-the-hunt-for-the-mystery-holding-company/
-https://www.bloomberg.com/news/articles/2020-08-19/billionaire-greensill-s-german-bank-draws-regulatory-scrutiny
-https://www.fnlondon.com/articles/ex-city-minister-pushes-for-probe-of-softbank-backed-greensill-20200702

Seadoc, short, replied to an aggrieved 'long', that 'we could both be right, just not at the same time'

This article IMO makes the case for both.

Hi occams/ARahim,

Occams ' consideration ' here is just a fancy way of saying 'payment' in exchange for the 'call option' : £ 1.1 million.
ARahim, the option can be exercised IF the s/p at the time is 0.6945p or more. That number is the 'trigger', not the acquisition price, which is unknown.

Both those bits of info ARE in the RNS, there is nothing in the RNS to tell us what 'consideration' ie payment AZ /Orchestra Group (grantee) has to make to grantor . The RNS doesn't tell us who grantor is, though we can guess it's almost certainly one of the original group of shareholders (a) because it's unlikely anyone outside has that many shares available and (b) because , if the call option is exercised, they'll settle by 'direct transfer' and AZ /Orchestra Group will 'receive ' the shares that way'.

ATB

Hi Parm,

..'if the share price is say 1.5p on said date what does AZ actually pay? "

It's not clear...and we may never find out. There's no strike 'price' (right to buy at a specific price), only a strike 'trigger' - if it's @ 0.6945 or above on the relevant date 31 Dec.
From the wording of the RNS - 'right to receive', rather than something on the lines of 'right to acquire/buy' - this looks likely to be a reshuffling of holdings amongst the founder, not necessarily core, shareholders, usually worded - if/when it happens - as 'direct transfer to security account'.

The price paid will be whatever the grantor and grantee of the call option have agreed.

ATB

Hi apunter2,

(1) Has AZ described or not described newBank as a ‘captive bank’ .?
(2) Does ‘captive’ convey to you the same meaning as ‘ has first right of refusal’ ?

It’s not that difficult.
ATB

Hi Redbox,

It’s not a ‘bait’ to ask someone to backup a claim, if you think it’s not accurate. If you KNOW better, why not chip in with chapter and verse, which I assure you would silence most reasonable posters, myself included.

If you are unable to, then have the decency to STFU and wait for someone better qualified / more knowledgeable to provide a rebuttal.

If you didn’t think or didn’t know that seadoc was short - he almost always says this explicitly in his msges, even quoting specific amounts - I would suggest that’s a failing on your part, not his.

When you choose to play the man, it tells the viewer that you can’t get the ball any other way.

All IMO
ATB

Hi apunter2,

Right. So how do you square the 2 very different statements - and meanings ?

Especially when newBank , under normal bank rules, has to be - and be seen - as non-captive ie ‘independent’...?

If 100% of its business comes from its CEO, who is appointed By the company sourcing the business, don’t you think that might be a bit problematic ?

How - under the lawOr just common sense - can this possibly be ‘squeaky clean‘ ?

I always look forward to your replies, but I’m really interested in this one.

ATB

Hi Weathergeek,

“1.FSA had to approve it. “

Link, pls.

ATB

Hi Weathergeek,

With respect, any company that can turn ‘ the bank has first refusal right’ in an RNS to a ‘captive bank ‘ , obligated to fund, within 24 hours is unlikely to be - IMO - too concerned about the fine print In the ‘rules’...

ATB

The DeBeers story I heard from someone in the industry - 'MadDutch', IIRC -who 'dredged' alluvial diamonds in Namibia.

He told the story of a young Oppenheimer, newish PA to DeBeers, who came in excitedly with the 19th C version of a large spreadsheet, on which he'd painstakingly worked out how the old man - through a series of convoluted cross-shareholdings - managed to control an improbable range/number of companies on relatively little apparent outlay.

DeBeers reportedly looked at the papers for a while, then eventually nodded approval and said "Well done ! Now destroy it."

ATB

Hi seadoc,

This about ParrotCapital, your missing investment fund, one of the 3 x 4.98%. One or other of Parrott and Equita have been nominated by apunter2 as the likely source of the 630m AZ option shares...as their stakes were originally 1.63 billion...

Meanwhile, re Parrot, from yesterday 12:39

"People shouldn't rely on great CV's.

I've already mentioned Theranos https://www.jflinch.com/theranos/#:~:text=%20Board%20of%20Director%20Lessons%20from%20Theranos%20,morally%29.%20Diversity%20does%20matter%20morally%2C%20but...%20More%20

which had these luminaries on board : .." George Schultz, former Secretary of State, Henry Kissinger, former Secretary of State, General Jim Mattis, former head of US Central Command and former Secretary of Defense, Richard Kovacevich, former CEO and Chairman of Wells Fargo, Sam Nunn, former US Senator, and Bill Frist, former US Senator and heart surgeon..".

Closer to home, one of SYME's seed investors (@ 4.98% ) is Parrot Capital (Global Capital plc) Malta.

Here's a link thttps://www.globalcapital.com.mt/investors-relation-corporate/
to a highly qualified BoD, laced with pedigrees from FranklinTempleton (world's third largest asset management group) , KPMG and major law firms.

And yet, if you google the name, there are a litany of press and other articles reporting major governance failures , mis-selling, failure to file accounts, mis-representation, unexplained departure of CEO, etc

-https://www.independent.com.mt/articles/2019-06-11/business-news/Major-shareholder-of-Global-Capital-plc-fails-to-file-annual-financial-report-and-accounts-6736209403
- https://www.independent.com.mt/articles/2019-05-02/local-news/Listing-and-trading-in-GlobalCapital-shares-suspended-by-financial-services-watchdog-6736207542
-https://www.independent.com.mt/articles/2018-03-18/local-news/What-exactly-is-Global-Capital-plc-all-about-6736186435

These are all recent articles from the same source, so there may be a political or other axe to grind, but a good Board - especially of a company in the financial sector - wouldn't leave itself open to reporting of this type.

Quite the opposite. Like Caesar's wife : " Not only pure, but seen to be pure".

ATB

Hi seadoc,

The Prospectus, p.14, when talking of the Consideration Shares, says..."The premium to net asset value of the New Ordinary Shares places an intangible value on the strategy proposed by the Board and the human capital contained in the Board, as well as reflecting the costs incurred in the Acquisition, Placing and Admission."

The costs were written off in the Interim Trading statement, which begs the question as what costs DW is referring to.

Also worth noting that the Placing Broker was Epsion Capital , to whom a goodly portion of Placing Costs were due :
.."In consideration for its services under the Placing Agreement, Epsion Capital will receive from the
Company a commission on funds raised under the Placing by Epsion Capital and/or its sub-agents In
addition, the Company shall pay all other reasonable costs, charges and expenses of Epsion Capital."

Epsion is wholly owned by Eight Capital, 40% shareholder in Finance Partners, where DW is a Director , which has a 17.66% holding in TAG, FP also being owned 30% by iWep, a DW vehicle.

The cross-shareholdings are worthy of DeBeers/Oppenheimer !

ATB

Hi Vulcan998,

.."so why would the chairman have costs associated with the listing? never seen this before..".

A good question ! Of the £ 2.2m Placement proceeds, £ 800 K went on the 'usual' placing costs (though 36% of total raised covers a lot of expensive lunches and 'corporate hospitality') ...and of course a further £ 225million were written down as 'deemed costs associated with Placing' , so DW's costs are in the 'nice to know' category, I guess.

Since his in and out both work out at about £ 1.5m, it's entirely possible that he had some intraGroup costs to settle, mobilised the cash in advance and then thought/expected to make a bit extra before due date, only to find that the market didn't go his way . Hands up who's not done that ? I have, with future school fees and upcoming 6month rentals to settle. But have usually managed at least to break even....

If this was what happened here, it would rather knock any suggestion of (competent) insider trading on its head...

But my sympathy is conditioned by the observation that he's still sitting on over 19% of SYME based on a shedload of nil cost/negligible cost Consideration Shares....so he has an essentially free carry anyway.

ATB

Hi LexLugar08,

.."Why doesn’t AZ buy back the shares pledged against the loan at what was it 0.07? .."

Because he can't. Loan term is minimum 2 years.
I'm also not sure that the shares pledged have been flipped. That was my initial concern (a la First Equity/Quindell etc), but a couple posters, notably jimbob83 IIRC, felt that they couldn't be sold outright, only 'traded'.
In any case, I suspect AZ doesn't have the 'readies' for bug cash outlays, his preferred currency will be the nilcot/negligible cost Consideration Shares, where he can get his hands on them.

ATB

Hi all,

Somewhat closer to 'our sheep', the elephant in the room - to mix metaphors/animals - is China, where Xi has announced to the UN serious measures to address carbon emissions and climate change.

The Economist's take/extract is :

..."Crucially, China has not spelled out whether its new target will cover domestic emissions only, or include the emissions caused by China’s generous investments in coal outside its borders, including through the Belt and Road Initiative, a global infrastructure-building scheme. A new five-year economic plan, to be adopted next year, may provide clues to China’s plans for ending fossil-fuel dependency.

Achieving the 2060 target will require a complete decarbonisation of China’s electricity supply, more than 60% of which still comes from burning coal. Yet China is still building coal-fired power plants faster than any country. In the first six months of 2020 it built more than 60% of the world’s new installations of them. Carbon-heavy infrastructure being planned and built today could remain usable for decades. China’s efforts to revive its covid-struck economy include making it easier to secure permits to build such stuff..."

So , for both domestic and BRI reasons, China seems unlikely to change tack for the foreseeable.

ATB

So,

Me again .

Or are you saying that AZ is acting as middleman, sourcing from one 'regulated institutional entity eg private bank (Equita or Parrot ?) a pot of shares (at an agreed price) for future delivery to a second, more mainstream, funding/lending institution ?

Now something like that would make sense ...and be interesting.....
Need another coffee.

ATB