Monday, 11 July 2016

Cgon takes the Crowdcube Prize for seismic gaps

Cgon raised £160k on Crowdcube in October 2014

The Crowdcube financials show a profit for YE March 2015 of £1.1m and for YE March 2016 of £5.9m.

Now presented with these figures people who didnt know any better might invest - and 115 of the so called sophisticated investors who inhabit the Crowdcube virtual world, did do just that.

The real accounts show that the company made a £70k loss in the YE March 2015 and a mere £320k loss in YE March 2016. 

We spoke to the company and they told us that there were two main reasons why this differential came about. Firstly the company had only applied for a UK patent and had discovered after the CC raise that it needed worldwide patent cover - this stopped them selling the volumes they had projected. Secondly the product has changed, considerably. So what the CC investors put their money into is now something else. The good news is the management now say they are on target - which target we dont know. 

In the pitch document the company claimed that TAG Global Distribution Ltd had taken a 14% stake in the company for £200k by buying owners' shares. We are not sure this ever took place, records show no evidence of TAG as a shareholder or any of TAG's directors.  TAG itself appears to do little or nothing, despite the write up the pitch gave it. So the fact that the pitch stated they would distribute Cgon's product for a minimum of 12 months after funding seems like another moment the CC Out To Lunch Department went to sleep. They have no website. 

As we have been saying for many years now, something needs to be done to improve the way platforms use financial projections to sell equity in companies when these projections have no basis in the real world. The explanations here seem to us to be rather flimsy. Of course no one expects the projections to be met exactly but you do have be on the same planet or there is no point in having them.

At a time when Crowdcube are bigging themselves up with national adverts applauding their success, in order to help their forthcoming, much needed, cash dump, dont you think it would be nice if they could address this issue head on? 

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