Member Info for Silverblade

Its been almost four weeks since the 9th October initial RNS and subsequent clarification there was a revenue issue (plus two) which has now been clarified. Despite some concerns there needs to be full closure on accounting treatments, I agree with Hucks – its not all doom and gloom.

There has been talk of larger parties exiting – not true. Indeed, quite the opposite – our major II’s have continued to increase their shareholding throughout the year – adding 65m so far this year. Not one sell (none reported).

TH and MS leaving will see the cancelation of c. 50m+ share options reducing any potential dilution. This will also reduce share-based payment expenses.

Our net assets are $80m - equivalent to 6.75p per share. No debt, cash generating, profitable with reasonable scope to reduce costs.

The majority of our core gtlds are increasing – we always knew vip (and likely work) were high volume, low cost, occasional freebies which we all accept were not doing us any favours apart from in the vanity DUM’s numbers game – and that was before the numerous bad debt issues and revenue deferrals.

Our current CEO (TF) was part of a highly successful registry (ICM); which we now own; and worked alongside SJL to make that an attractive business sold for a healthy premium to a larger registry, accepting that consolidation was the way to create additional value. It might not have worked out as well as expected; but that was a risk they (esp SJL) were prepared to take. I’m pretty sure that fact will not have been lost on Guy Elliot and the board in making the appointment. I’m also pretty sure SJL and TF will be in regular dialogue – they are virtually neighbour's! SB

Up to 18%. +8 m shares since last declaration. Thankfully they are purchasing - bit more of this and we should see some positive impact on price - they must see value here and clearly would have been aware of proceedings - and have voted accordingly. I think Guy Elliott may be their rep on the board. SB

Goodness knows. Last mention of it I can find was in the interims "The Company intends initially to announce a tender offer of £3m to take place in November. This will be supplemented by an ongoing buyback and an intention to target further distributions of approximately 50% of free cashflow from operations each financial year ".
Couple of things happened since then of course.....but the only confirmation in relation to the above was the postponement of the tender offer. FinCapp were meant to be arms length decision makers - but there was some guidance on price and volume - goodness knows what the last month has done to that. Another stone left unturned. SB

Good points Huck. The share trading says it all. No confidence in the business. Plus we have an exec chairman back in the seat who should have been more hands on in the first instance; an interim CFO who was in charge of audit and who must share some responsibility for the revenue mistreatment; and an interim CEO who is not a board director (This is possibly a function of finalising TH's corporate resignation). The RNS was unclear as to whether TF's interim appointment was until he is formally appointed; or until another CEO is recruited. The RNS is clearer on the CFO - which is interim until a permanent appointment is made. You are correct - there's still a lot of work to do here - and investors remain nervous about further announcements until we receive the clarity we need on the way forward. SB

YHAL – i think it would be fair to say major shareholders have exerted considerable historic influence on the company in terms of returns. Where has it gone them – combined losses running into tens of millions in capital losses. I don’t disagree that eps is an important metric; and that dividend payments are often ‘netted’ off share prices once shares go ex-dividend – but that’s no different to any other company. The point being the business needs to change its approach to creating shareholder value – because after 10 years + its now either a sustainable business capable of distributing earnings to its shareholders (how companies/individuals deal with tax is nothing new) – or its just another AIM wannabe which has raised significant amounts of money in the capital markets to fund 10 years of mis-management. The message a dividend sends the market is a pretty important one imo.

I would also expect that some form of trading update requires to be issued – Q3 as an excuse – to underline that business operations are ok and generally make some positive refences to the underlying health of the business. SB

Vip is in free fall - but we know why. Work not great but not a disaster either. Everything else ok for now from what I see - most growing nicely - albeit from a low base. We will have to wait and see the net effect of likely losing 20% of our DUMs in revenue terms by the year end. Our new interim CEO and CFO and exec chairman have some major work to do here to stabilise the business - and i agree we all need some reassurance once and for all on legacy issues having been dealt with. Let’s hope the work started today in earnest. SB

DrK/bakky - guess I was hoping someone was buying as opposed to selling / wishful thinking!! SB

Bakky - what do you make of the 1m trade today. Buy? SB

Not exactly the price response we expected with the resolution of the revenue issues - early days I guess. I wonder if anyone else left with TH and MS - as exec directors the company had to notify the market of those changes - but there were a number of additional senior positions who might have been caught up in events - and noting none were felt capable of the interim CEO role. SB

SS - thanks - maybe I’m being overly cautious in my view - but that stems from too many issues over the years and too many financial hits. We all want the same result here - a good domain business with a growing core portfolio; run by a small, experienced and capable management team; generating real shareholder value through dividends and capital appreciation; with time to recover from a legacy we all shudder to think could have happened in a relatively simple business. We need to retain II support - and they need to have confidence we have cleared house at both management and operational legacy levels and can finally start to deliver on our potential - too many false dawns. SB

YHAL - I refer you to SJLs post last week / point 8 / when presumably referring to mmx current trading “ The market, investors and the ICM vendors relied on these numbers backed up with explicit and specific warranties concerning them in 2018“. I think we are being naive to assume this issue does not require investigation - it’s a sore point for SJL and rightly so if those warranties are found to be dodgy - and what specifically was being warranted. SB

Morning SS. Agree with your thoughts. One of the issues which that gave me some concern re the ICM takeover and recent comments from SJL were the warranties (financial) that appear to have been given to ICM at the time of the deal. Whilst we do not know the detail, we do know there may be questions around the validity of those warranties given subsequent financial issues esp in relation to Chinese debt. Current and former ICM shareholders are likely to want some answers - I would. And with SJLs former COO at the helm you would think they will get some answers. A complete financial review/overhaul in public of the business is required if we have any chance of regaining trust and being taken seriously. I would welcome SJL back with open arms as a shareholder and to try and reconcile any grievances towards mmxs past behaviour. SB

I hope so bakky. Jeez I hope so!! SB

Evening all. We will probably never know exactly what occurred here - FWIW I cannot help but think MS was central to many fairly serious financial decisions / not fraudulent / but certainly at the edge of good accounting practice. He got away with this when two previous CEOs were bulleted - but time caught up eventually. Perhaps TH was too trusting; too eager to drive sales volume and accepted the advice presented to him that the deals were genuine and bookable as revenue. But you would think given mmx history he would have ensured proper accounting was followed. I’m not abdicating TH - he had to go - but suspect he got caught up in MS‘s far from acceptable method of counting. Interesting couple of months ahead - we have a number of senior industry players in our team - and yet we have appointed externally to right the ship. I like the sound of a straight talking no nonsense shareholder focused CEO who understands what the company does, what it needs to do it and how to deliver for shareholders. Whether Tony F fits that bill only time will tell - if he gets the permanent position - but from what we have heard so far he sounds like the wind of change we need in the short term - and possibly longer. I only hope he doesn’t uncover any more crappy deals - that’s the last thing we need. SB

Sadly lots of wrongdoing occurs in corporate business activity. Companies often prefer a swift exit for those involved wIthout parties having to air or admit what has occurred in public - it can be expensive, damaging to all parties and drawn out over a protracted time period. So a deal is made / draw a line and move on. Whilst TH and MS are in the wrong - where was our governance, auditing, reporting, checks and balances etc. It’s hardly the first time we have had issues over contracts. Our board have not come out of this with any level of credibility - this happened on their watch. If I was an II I would be looking for improvement in all areas of company management and governance. SB

We have written off at least $3m in Chinese debts in the last two years accounts; and have no idea how much of our deferred revenue relates to vip. It is hardly a good example of how to make money selling domains when you never actually get paid for the sales. It is not a great chapter in our recent history. SB

2019 / $330k salary each plus $20k benefits for TH and $40k for MS. No bonus - but 13m options each. We have to make a fairly large allowance for severance in H2. But all options should be cancelled - probably quite messy and another reason for delay in update. SB

Thanks for your thought Hucks - yes this has been weighing me down of late. I'm sure i'm not the only one - but i have amassed far too many shares over the years tbh - and i'm heavily underwater. The problem with situations like this is the fear that the whole business has been so negligent that its viability is at risk - and with it our investments. So todays announcement and actions, SJL's input yesterday (which I feel may be more than just a coincidence!) have improved our outlook considerably. I expected the tender offer to be withdrawn - the next few months are about putting in place the right management team to move the business forward, close out the year with hopefully a decent H2, look at our overheads and determine what the business needs going forward, possibly see SJL or others actively building stakes, communicating a clear and transparent plan for a simple business, improve governance, and use basic accounting principles for revenue treatment - all looking to rebuild confidence that has been missing for so long. ATB to all those who contribute to this board - I hope this is a turning point. SB

Perhaps it’s no coincidence SJL rejoined the debate yesterday!!

TH and MS will have agreed packages to exit - that’s the way it goes. On the plus side - their options will now disappear.

Let’s hope today sees a positive reaction - on the face of it we have cleared up revenue issues, dealt with the executive team responsible and brought in some experience from a credible source. SB

I assume the current company valuation reflects the ‘risk’ attached to the current investigation uncovering more than the $1m problem, and the issues associated with moving executives on. If the issue is contained to $1m we should see a health bounce immediately. Really pleased that SJL has come in today and shared his thoughts - some positive in terms of potentially investing, indicating thee are good people out there to right the ship, and that consolidation continues. The negatives are well understood / crap accounting, poor management, dodgy revenue arrangements, poor auditing and zero corporate governance. I’m feeling a bit more positive than recent - good to chat team mmx. SB