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Referencing the Start*Art acquisition RNS in August 2022:
"For the period ended 31 December 2021 Start Art reported unaudited turnover of £0.554 million and had at that date net assets of £1.5 million. (£1.2 May 2022) Going forward, the core strategy of Start Art will consist of three main streams these being art and art related physical shows, on-line and off-line sales of art and K-Pop related merchandise and NFTs. There is also the opportunity for sponsorship revenue for each event being held. The synergy between art, popular culture including KPOP and live events further validates the acquisition.
An independent valuation was conducted which valued the entire business at between £5.0 and £5.5 million and the element of the deferred consideration which is performance related is tied into the projections inherent in that valuation".
1. If the 2021 turnover of Start*Art was unaudited, why did he NOT point out that 2022 turnover was trending 60% below 2021? (It ended up at £218k by end 2022)
2. Given Start*Art was virtually worthless and offloaded to LVCG in an act of desperation, will he and his partner Ranjit write off the
No Suedee - I'm afraid that I don't hold out much hope for Live Company to be honest - especially now Bricklive has effectively been flogged off. Tina may be working hard but we now only have 14 sets and the building/ maintenance function has been lost. I'd like to be proved wrong of course. 'Id also like to see the auditors sign off the business as a "going concern". I imagine that this has been a sticking point regarding the accounts, so let's see! Seeing is believing. The issue I have is whether there has been any fraud or behaviour that stops Ciclitira being able to act as a company director in future. I am not saying there has been fraud, but there the Smart*Art transaction looks at least questionable to me. The directors must have known the business was tanking in July 2022 when they made the sale. Ciclitira had a fiduciary duty to advise that the business performance was well below prior year - especially given his obvious vested interest (selling a personal shareholding in a business to another public company of which he was chairman). Just my view...
Trouble is Suedee that producing events is a complex business and requires real expertise. As a rule of thumb, anything below 80% capacity puts net profitability at risk. Why do you book the O2 over a year in advance without any clarity on the acts you are going to present? Why do you start with 3 days - better to start off with one and then expand the offer due to demand. What research underpinned the decisions on pricing? What appeal was there for new "upcoming" K-Pop acts (the London O2 concept) - most people new to K-Pop want to see the big names! Why was everything so late - leaving no time for promotion?
Other questions - what insurance did Live Company have in place? How much was it to cancel the O2 etc....
I suggest there was a pattern of poor decision making here that led to the fiasco of the cancellation (sorry, postponement). Whatever the opportunity K-Pop represents, Live Company never had the expertise to exploit it.
I have no proof Jimmy that K-Pop is a fad so you may be right - it's merely a point of view. But 53% fewer K-Pop tracks charted on the Billboard Hot 100 in 2022 versus 2021, according to Bang.
Interesting article here about how the music industry is looking to move beyond K-Pop
https://www.billboard.com/pro/k-pop-crisis-hybe-global-expansion-beyond-genre/
If this is true, I would say a brand like K-Pop Lux has no value.
Anyway, I agree with you they should ditch K-Pop!
I'd personally also add that I think K-Pop is a fad outside Korea - and anyway other bigger producers are starting to muscle in. There were other K-Pop shows in London during September 2023 and that will have impacted demand for K-Pop Lux.
Agree Jimmy. Let it fade away. I was concerned when they strayed away from the focus on Bricklive. There were some posters who tried to make compelling cases for K-Pop and lot of PI's got swept up by the hype. But the necessary skills to manage event promotion of this type (such as demand and pricing management and event promotion ) have been lacking. They added a day to Frankfurt last year that fell well short of capacity (thereby reducing profits significantly) and both attempts to produce a show at the O2 were a fiasco. I am sure other partners exploited the naivety of Live Company. But Smart*Art was baffling - until you look at the deal - the convenient offloading of a fast declining, loss making business.
The terms of this transaction with Iconic must be scrutinised Guzzler
The original case for investing in Live Company has evaporated. The business model - build out a range of sets with IP attached with a fast payback was attractive. We understood the setback of Covid. But with diligent execution, this business could have be become a strong cash generator. Then, with the cash you could explore other event based opportunities.
But given the questions over Ciclitira, we cannot put this terrible outcome down to poor business decision making/execution.
So we need to see the details of the Iconic transaction, and what (if any) residual interest (shareholding/ fees etc) Ciclitira or other Live Company personnel have in the new independent business.
Your comment (Guzzler) about Norris-Grey is shocking - assuming it's true. Did the directors call for a vote of no confidence?
I put the K-Pop failure down to incompetence and the allure of a lifestyle opportunity, but I still maintain that the Start*Art transaction is legally the most questionable. Please correct me if I am wrong , but how can a severely loss making company with a £554k revenue base, that was suffering a 60% YOY revenue decline at the time of the deal, possibly justify a £3.1 million (or even £2.2 million) valuation on the basis of £554k. The issue is that no-one was told of the ongoing revenue decline. I believe this is misleading.
You're not the only one 212!
Look, business can go wrong. I recognize that Live Company was extremely challenged by Covid and the numbers obviously suffered. They did well to keep going. But whilst some other dealings are highly questionable, this Start*Art transaction is by far the most questionable in my view. Think about the timing of the sale and direction of revenues at the time.
Looking through the RNS that covered the Start*Art acquisition on the 8th of July 2022:
1. It states that the 2021 revenues for Start*Art were £554k. This is also stated in Dec 2022 accounts filed at Companies House. This £554k was part of the justification for the valuation of Start*Art. Indeed, read through the RNS and a bullish outlook for potential revenue growth was provided.
2. But 2022 Start*Art revenues actually came in at only £218k. This is 60% below 2021! By July. the directors of the company must have had a strong indication that annual revenues were likely to decline significantly – they have a fiduciary obligation to evaluate company performance.
3. Nothing was stated in the RNS about the clearly significant risks to the Start*Art revenues in July 2022.
4. As already stated, the largest owner of Start*Art was also the Chairman of Live Company
5. The failure to highlight risks to 2022 Start*Art revenues in July 2022, at the time of the sale to Live Company, was – in my view – severely misleading.
Put differently, would any shareholder (other than those selling shares in Start*Art) have approved the deal if they knew the 2021 Start*Art revenues were declining by 60% in 2022?!
Another very good question 212. I could have added that to my list of doubts in my post. We need a clear and credible justification for the financial valuation - it would be helpful if this were published. There is a clear potential for conflict of interest in this transaction.
Any decent accountants among us?
Read through the accounts for Company number 13113084 - Start Art Global Limited
https://find-and-update.company-information.service.gov.uk/company/13113084/filing-history
IMHO there needs to be more scrutiny of the Start Art accounts and purchase. How this was apparently valued at £4 million (hastily reduced after shareholder anger) is beyond me. £3.1 million still seems way, way over the odds for a business with £218k turnover according to the December 2022 accounts. What I can't understand is:
1. How a business with £970 in tangible assets (£1,364 in the financial statement - point 7). Yet, the same financial statement says "depreciation of financial fixed assets" is £125,533...
2. Rent is listed at £72,900 (renting what?), and legal/professional fees at £76K (my own business turns over significantly more than Start Art and the legal fees I pay are far, far less - so who are these fees being paid?!)
3. Overall, admin costs are £422,832 for a business that turned over £218,611 in 2022. Seems unusually high...
4. Retained earnings are now (£1,026,603) - negative. This, for a business values at £3.1 million.
5. What role did the company's accountants - Sole Associates SVR - have in valuing the company at £4/3.1 million?
I always felt this Start*Art deal was strange. Remember DC sold it to Live Company? The company was loss making, had no employees and very little turnover. It is now over £1 million negative on retained earnings. It (conveniently) does business in South Korea and South Africa. Ciclitira is listed as a barrister in the company accounts (albeit residing in Monaco). I imagine DC is too savvy/ professional to break the law. But I have passed all this on to my close, very senior lawyer relation - will be interested to see what she says.
0.25% is significant! And 0.25% of what this company should be worth with competent execution is a lot more than your current holding. Remember that DC was encouraging you to add to your 0.25% just before the temporary suspension.
Good post Retired banker. The bricks business had an interesting investment case - build up the shows and then make cash renting them out to zoos, shopping centres etc. My mains concerns were competitors and the shelf life of the shows themselves, but the payback was fast and the bricks can be reutilised. I have previously expressed concern about the "events" side of the business. The skills required are different from conceiving brick shows and renting them out. LVCG has performed poorly in this area. DC has not shown us he knows how to manage this area effectively. So I suspect you are right - there will be a scheme that probably means shareholder lose everything and the bricks business is brought back. DC will understand that if people like us lose meaningful sum we will not go quietly if loyal, patient shareholders end up being exploited for the gain of others.
MB10. Your comments about Paw Patrol are all well and good. So let's see how LVCG is monetising these impressive IP franchises through Bricklive. There was talk in the Dec 22 presentation of expanding into the Middle East and renting out higher value sets. I certainly hope to see this division turns in a good 15-20% ROIC in 2023.
Old news. This has been in the pipeline for a long time. This enlarged BRICS group would like to get away from dollar reliance but it won’t happen soon enough to help Argentina in the YPF / Peterson case.