The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Davand , seriously ?
best just wait to see the filing and supporting documents and you will see who said what and when and how this went down .
we insisted on warranties .
BB ,
one thing , and i may be wrong here :
you keep calling them “ warrants “ ( as in warrants to buy shares ) and your latest post mentions “ worthless warrants “ whereas what we are referring to are written Warranties by which each contracting party promises the other that everything they have told them and shown them are accurate and truthful : warranties are very common in sale and purchase agreements but are more rare for the acquiring party to give esp publix companies . as a result of some of our uncomfortableness following due diligence we insisted on them in this deal . normally warranties have a demimimus amount and a maximum and a period to claim under EXCEPT in the case that the warranties were entered into fraudulently in which case no time limit applies nor does any limit to the claims under the warranties .
just wanted to confirm we were on the same page as to what we are discussing here .
if i have misunderstood your use of the term warrants in lieu of warranties , then my profuse apologies .
BB,
guilty as charged .
i’m very quirky and definitely unconventional in my openness . i have a few Lawley life rules i wrote down many many years ago and remind my son of them quite often :
trust your gut instinct
always listen to good advice
always take the high road
play the long game
let the cards fall where they may .
rule #4 and #5 very much at play here .
some fair comments but also some inaccuracies.
if you check i actually said that bayern and nrw were profitable .
my point on all the partner deals is who “ owns “ the tld under the contract terms .
the icann contracts are in effect in perpetuity and no need to rebid . absolute GOLD to a would be aquirer .
any contract that MMX is running on behalf of someone else has substantially less value as at the end of the contract it can be lost or it’s profitability vastly reduced : see .org / .co / .au as examples .
so a revenue and profit rate that isn’t going into perpetuity has substantially less value than one fully owned free and clear by the company .
london / boston / bayern / nrw / law/ miami all spring to mind in that category: not saying they all may not be profitable but have impaired value vs other like fit/ wedding / yoga et al
that was my point .
was only kidding re : block : never done that in my life .
as you pertinently pointed out a “ proper “ revenue stream in the ones owned fully puts a different complexion on this business .
however my other and possibly main point ( that i do keep carping back to ) is that if the companies supposed jewel in the crown has been and still possibly is built on sand , it is going to be painful to reveal the “ true “ state of affairs .
on the positive side , it has probably taken TH/ MS being fired to be able to explain why the million registrations are not real and why the financial performance of that TLD may look very different going forwards .
very hard to do as the CEO if you were the architect of the initial and ongoing “ scheme “ , hence my prior comments about them becoming trapped in the scheme . i’m sure that’s how nick leeson started and bernie madoff , a little at first , not intending to perpetuate and then realize got away with it , so revisit the same well and increase the ampage to keep the grand scheme going , all along hoping to be able to be able to get out from under it .
we have all seen the desperate attempts they went to in 2019 to “ create “ revenue they could recognize to inflate the numbers that simply didn’t exist .
you don’t think the Chinese well hadn’t been mined in a similar vein ?
much harder to detect , easier to fool non execs / due diligence teams and auditors even for a more difficult to understand TLD in a far off land ?
many layers to enable obfuscation .
wake up chaps .
tens of thousands perhaps a hundred thousand registrations in easy to fathom normal tlds and a million in .vip ?
has anyone here ever downloaded the Zone file for .vip and examined the registrations ? we did in 2018 when had 1/3 of the regs it had today and had some direct questions to ask about the veracity of of same : lies and warranties ..
when one chinese individual registers over 100,000 totally meaningless , clearly computer generated random gibberish names ?? please ...
and they are part of the same crew that “ bought “ $3.4 M of premium
oh Bb,
i forgot
i said i want going to engage with you anymore .
apologies , is there a block button here ?
BB ,
i just don’t know where you get your thoughts from !
i have no interest in hurting the SP . quite the opposite as my friends and family still own some 40 MM of them which is probably more than most here : so do me a favor .
the icm vendors were lied to and misled , deliberately as was the market .
i am seeking a leveling up of that , that’s all .
yes the company paying out a settlement via cash or issuing more shares may hurt the SP in the meantime , not much i can do about that .
FWIW i told the holders of the 40MM not to sell at current prices .
to hear your reasoning , we should just suck up being ripped off and lick our wounds ? not this boy .
we agreed to the stock deal as we saw a path to upside based on what we saw and told : this sadly , wasn’t true .
i have stated categorically that i think there could still be substantial upside in this stock and also expressed a willingness to buy once this is sorted .
your constant carping about a motive to harm the company or run down the SP , is way way off the mark .
you are pointing the finger at the wrong parties .
bakky ,
that’s the $64,000 question
hopefully 20 + the adult ones
BB ,
we’re just examples :
i think ultimately mmx dont “
own “ all of the Tlds so take london when contract finished , it’s over ..
law may be the same with the partner taking all the spoils until their investment paid off ( likely never ).
bayern and nrw also i agree profitable but not fully owned by the Co so less value .
but are some decent fully owned ones . fit etx
vip and work fully owned but are they worth $2m or $20Mm each ?
like i say a mixed bag like all portfolios .
1-32 : each with a value from almost zero to perhaps more than $25M each ...
my understanding is that a) they have received notice from me that layers are instructed b) the lawyers themselves will write monday to confirm that and then c) i think the process required now is that a detailed letter of claim before /of action or something like that needs to be sent .
the legal process steps have changed in the 20 years since i left but whatever the process is it will be followed .
what the trigger is for the company to disclose i have no idea .
with regard to the “ fundamentals “ mentioned , apart from the ICM performance ( very strong i gather ) it’s very hard to know what they may be .
some of the TLDS are total write offs with such a paucity of registrations that they don’t even cover their basic icann fees etx , certain others the revamped partner contracts mean that they can never make a contribution to the bottom line or have any value associated with them ( thinking .london and .law here ) plus perhaps some of the same for .bayern / boston / .nrw and .miami .
the rest have some value and post stripping them down and analyzing whether any money and if so how much can be made from them , then a value can be attributed to each one .
i maintain a spreadsheet that i update occasionally which associates a notional value per TLD that may be achieved if they were sold to a portfolio bidder .
that’s the key here to assess how the true value of this business , the sum of its individual parts .
any bidder woukd just swallow up the TLDs, fire literally everyone so the actual EBITDA is a false indication of what the potential value of the business is .
there are 32 TLDs , what’s the sum total of their individual values to a portfolio buyer .
scotty ,
the company isn’t bankrupt
has cash and is making some profit
excellent profits from the ICM side and as i have alluded to before losses on the legacy mmx side .
once all the fakery is washed out of the 28tld and the pretense and fake DUMS don’t have to be perpetuated which actually CAN be achieved by this cathartic experience then there is a mixed bag of TLDs left .
not being on the inside i have no idea how severe that surgery is going to need to be but my guess is that over a million DUMs will be washed away .
it should be possible to recraft those tlds with new pricing and genuine registrations to make a decent profit .
if they do it , even a modicum of success should bring $10M plus a year profit and the corresponding business valuation of a clean , trusted , reliable and understandable income stream :12-24 months out .
you can do the math on the multiple and the SP to see what the end result can be .
more denial and trying to hold onto fake , worthless dums as window dressing doesn’t get the company where it needs to be .
i’m sure TF is making that point
Scotty ,
yes you wouldn’t want to hand over any smoking gun of course so you would be faced with 2 choices : put your head in the sand and hope he goes away or engage .....
Up to the point action is actually filed with the court the matter isnt sub judice and and is in effect “ sabre rattling “ .
is no different than others coming here and saying “ i think this / that / the other and am going to sell / buy / hold / sue , blah blah blah .
i have revealed no “ insider “ information as i have none and am not considered and insider so am as free as anyone to discuss my thoughts and plans .
and addressing the few other comments : some icm vendors still own probably close to 40 million shares , not a great deal but a few % .
and i did “ notify “ the company of my intention to begin legal proceedings on receipt of the fox trot oscar letter , which notably did not contain any denial of suggested allegations, just simply a refusal to engage .
like a game of tennis , they hit the ball back over to my side of the net , and i told them what kind of volley to expect as it comes back their way .
time for a bit of formula 1 now on this sunny FL morning :-)
keeping shareholders in the dark may be the MMX m.o. but not mine , be it good news or bad .
this board has received much more honesty and explanation and granular analysis over the last 2.5 years than anything put out publicly by the company .
i understand some may not like what they hear , but forewArned is forarmed .
YHAL ,
it was my legal team that asked ! same firm that did the deal ams have represented me for 30 years.
so a flat no means either think i’m bluffing and will go away or have something to hide .
the next step is the legal preceedings , which even if the company believe no case to answer , means a whole bunch of pain and costs and likely have to produce the requested documents anyways .... duh ....
having just basically admitted fraud by restating your accounts one would have thought the last thing the company would want is a lawsuit alleging the same 2 years ago ... if no case to answer the docs shoukd make that clear , so why not send them over pre- lawsuit ? do everyone including yourselves a favor .
the rub here may just be that they did know the debt was questionable and needed providing against but didn’t want to admit that during the deal negotiations because to have done so at that time would probably have meant they would have needed to disclose to the market also contemporaneously and by doing so may have tanked the SP and the deal would have a) floundered or b) been on different terms in light of the different numbers ... you follow ?
so perhaps decision taken to fib and get the deal done and across the line and hope u get away with it later ....
looking at the 2018 and post ICM deal performance of the mmx portfolio one can see why they wanted the deal .
an early disclosure of the uncollectibility of the china debt in truth probably would have meant the 2017s would have been restated to exclude $3.4 M of sales and $3.4 of EBITDA :-(
BB, yes it is and thank you
BB,
i understand 100% with what you are saying and just for the avoidance of doubt let me spell out exactly what it is that leads us to today’s position .
this isn’t an exhaustive list by any matter , just an example of one of the issues at the hub of this .
during the DD the china Premium debt was flagged as suspect , this is now 6 months after the deals were supposedly consummated . we ask a whole bunch of expected and probing questions about same and are provided with written answers by TH/MS and verbal assurances . we are still not satisfied and suggest delaying any deal for 6 months so that the reality of the situation is realized . MMX don’t want that and sweeten the deal with $10MM cash plus agree to warrant that everything they have told us is truthful . we take that as sufficient comfort to proceed with the deal in May 2018 and the warranties are made at that time and are reaffirmed 6 weeks later on june 18 . the accounts to 30. june 2018 , just 12 days later contain a provision of $2.1 MM against the very debt we are promised is collectible . not happy , are given further reassurances at that time and decide to let it lie . fast forwards a couple of years and the whole $2.1 is femmes i collectible and a further $1.3MM of the debt is written off . TH and MS get caught in an accounting fraud (3x) and fired . we decide to write to the company , basically saying “ we aren’t very happy and have a reason to suspect we weren’t told the truth by TH/ MS in 2018 as it relates to the China debt . to clear it up and out our minds at ease can you please send us certain. documentation such as correspondence with the auditors / amongst the audit review committee and between the debtors and the company to prove who knew what and when in 2017/2018 around the time of the deal , so we can be assured we weren’t lied to and the warranties were NOT in fact given fraudulently “.
not impolite , not too much to ask and all stuff that would come out in any subsequent litigation . rather than just hand over the vindicating documents and corespondence the company , in no uncertain terms refuses ..... would you BB draw any inferences from that ? if nothing to hide just throw over the requested docs under an NDA to make the allegation go away one would think ?
BB, for once i 100% agree with you .
YHAL ,
that’s part of the point : the “ lingo “ over why the dynamic duo were fired was very opaque .
from what i have learned the three offenses appear to be :
1) a registrar , assuming was attached to a handy discount , agrees in late december to contract to make a certain number of sales over the coming months / years and agrees to pre pay for them in 2020 .
with hardly more than a few thousand in sales made in 2019 , TH/ MS, clearly struggling to reach year end numbers decide to book $925k in sales knowing full well those sales haven’t been made
2) supplier A who is desirous and a contract for service with MMX to replace supplier B , agrees to front the “ break fee” supplier B is demanding of a a few hundred k . cash in / cash out : TH\MS decide to throw in a few premium names to supplier A and disguise / misrepresent the incoming cash as sales to boost revenues , rather than account for it properly
3) MMX decides to register certain names to itself or connected parties ( not an offense in itself ) but pay full retail price and claim that as revenue ...
each act horrible and deceptive in its own right but shows how badly they were “ at it”.
they quite rightly got fired for it but appears they only narrowly got caught in the act , most likely by sharp eyed BD or perhaps via a whistleblower .
so what’s your betting on $3.4 M of late 2017 premium sales in 2017 that magically were never paid for and subsequently written off as a balance sheet adjustment being of solid provenance ?
place your bets ...
SKK,
heads have already rolled .
recognition of the wrongdoing
a goodwill gesture at restitution ( cash or shares )
no interest in taking the company private on the cheap as that just robs other investors of any potential future upside.
the company shouldn’t really be public given it size but it is .
clear the decks , streamline and refashion it , deliver some predictable clean revenue and profit and sell it at an appropriate price to a willing buyer .
if i have shares then i’m interested in helping that reshaping .
cash / shares irrelevant to me but prob in the company’s best interests to do it in shares to retain cash and focus my attention to help rebuilding the SP.
oh , bakky , don’t forget i’m just a peasant too
YHAL , US or U.K.