Wednesday, 9 November 2016

Beware the DeListing - Righteous succumb to an inevitable end


The curse of DeListing strikes again. Isnt it time we all learnt the very obvious lesson?

Righteous have often been held up by Crowdcube, where they raised all of their finance, as a shining example of a great funding success.

Now in a letter to shareholders, Gem has offered to buy back their shares after the company's salad dressings have been delisted by many of their main clients. It now appears, according to the email, that salad dressings are not the guaranteed success story that was sold by Crowdcube to its investors - or at least not in this country. It's not clear what has changed - maybe the whole thing was made up from the start?

Righteous is a classic example of how not to do things. There is no doubt that they work very hard, but their business judgements have now been proven to be very poor. A deal recently struck in the US has been a disaster, their own words, and the company appears to be being prepared for mothballing. They cant say what they can pay shareholders for their shares - but acknowledge that they are strapped for cash  - so not much. 

Investors might feel slightly misled. In one of the early raises they carried out on Crowdcube, they had a contract with a US distributor as a mainstay of the offer. Not long after promising the earth, it turned out the first shipment had not sold well so the contract was cancelled.

Then Gem discovered cauliflower - creating Cauli Rice as a separate company and using Crowdcube to raise money for it. Despite some serious problems with a failure of the their product using winter cauliflowers, this business appears to be going quite well. But then, we all thought that about Righteous - right? Did investors in Righteous really sign up to a deal where the two founders walk of into the sunset through a field of cauliflowers - somehow we doubt it. It will be interesting to see what they offer to pay back  - maybe a share deal with Cauli would be a better option?

So the obvious lesson, in case you are a little slow, is that you cannot believe what they tell you and if the listings are mainly with the big boys, they cannot be relied upon. Do you think anyone would have invested in Righteous had they known what Gem has just told them - 

Because salad dressings is a shrinking category, supermarket buyers are giving it less space and cutting down the brands in the range - and sadly Righteous has been part of that cull  

- that it turns out salad dressings are not an important market in the UK after all?  

3 comments:

  1. Hello Rob Murray Brown. It is Gem here, founder of Righteous & Cauli Rice. Thank you for this blog post based on a confidential newsletter to our investors. And thank you for highlighting our winter cauliflower challenge on Cauli Rice - ANOTHER fact from another confidential email to our investors in our other business Cauli Rice. Now I know why your name sounds familiar as I remember you from our 1st round of Righteous where I asked to remove you from my list of investors as I was already questioning if your intentions at that time (and I found this old email from you on 23/022013 giving insight into the many 'pen names' you have to get on to crowdfunded businesses under an alias. You wrote: "I’m also phillesh and pigpen amongst others as CC [crowdcube] banned RMB [rob murray brown] from the forum." I'm curious as to how you manage your own clients at ECF who are looking for equity funding - do they know that this is how you manage to get your 'deep insight' into the world of crowdfunding?

    Unfortunately, there is no legal protection for small business owners like myself from investors with questionable motivations such as you so it looks like I will unfortunately have to suck it up and bare it.

    You are quite right that we are offering to buy back shares of our Righteous investors but this is not because the business is closing. Righteous has been going on for some years now, and this was an offer to investors who wanted an opportunity to get out as the business is still ticking along but without any good exit opportunities. I can confirm that we've been delisted in some major supermarkets which as reduced the value of the company so we are finding out what we can offer - This is a personal repayment by my partner and myself (which we don't have to do but want to do to to thank our investors for putting their trust in us - it is not something we are required to do but we are doing by choice).

    We always make sure to warn investors that they are investing in an early stage business which is not without risk & that they should only invest what they can afford to lose as we do not have a crystal ball to show us whether an idea will work or won't.

    It is indeed a shame that Righteous has not seen the same successs as cauli rice - despite being listed in over 600 supermarkets at one time for over 3 years before getting delisted, and fulfilling a £150k salad dressing order for Costco Canada which unfortunately was not repeated. You say this is because of 'Bad Judgment' and 'Righteous is a classic example of how not to do things' - how would we know, apart from seeing into the future - that certain product categories would begin to decline and get deprioritised by supermarkets?

    We have checked but legally cannot swap investor shares in Righteous for shares in Cauli Rice, so this share buy back is the next best option. (We decided to keep the 2 businesses separate to mitigate risk for our investors in both businesses)

    As for Cauli Rice, we may have ended our 1st year selling product worth close to £2.8 million in retail sales and breaking into the top 10 biggest rice brands after only 1 year of trading. But again, as I have no crystal ball, I have no insight into whether this will truly be a winner or not.

    All I can do is work hard to make the business a success, and treat our investors as ethically as possible, and hope that investors make an investment based on the vision we have for the company.




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    1. Gem thank you for your response - which according to shareholders is more than they get. We have made it very plain in articles and in this blog that we joined CC many times - so yes its public knowledge. Not knowing about the winter cauliflower sums up your business - ill prepared. Cauli will hopefully go on to great things and we will be delighted to report them. We have many followers who appreciate what we do here - which essentially is take the covers off ECF and reveal how companies are misleading the investors not only before they invest but even as shareholders. If that was not the case then angry shareholders would not be sending us information. I knew that salad dressings were going nowhere - why didnt you?

      Finally, the reason I adopted so many new names on CC is because people like you insisted in having perfectly acceptable questions on your forum removed as they damaged your chances of funding. As a result of your whinging I was blocked from the platform and had to re join as another name. Nothing mysterious in that - what is shocking and what your shareholders might like to know now is that the concerns I had for Righteous have proved well founded. Maybe if you had answered the questions instead of getting CC to remove them, shareholders would not be the the mess they are now.

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    2. PS - it was nice of your husband to ring me to ask if we could help with Cauli's next funding round. We only take on clients we feel have sustainable business models, so in this case we declined to offer our services. We wish you both all thew best in the future.

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