This is really hard to believe.
Flavourly, a very poorly run snack subscription service, initially raised money on Angels Den and then in 2015, over £500k on Crowdcube. The Crowdcube investors bought in at £1.2m - which for CC is low.
We have written a lot about Flavourly here. It has been disaster since day one so this should really come as no surprise. It's the way it's been done that takes one's breath away.
Now shareholders have received an early and very unwelcome Christmas Present from the directors/majority shareholders of Flavourly Ltd - Andrew Veitch, Ryan O'Rorke and Kevin Dorren - remember those names.
These directors/shareholders have gone behind the backs of the Crowdcube shareholders and triggered the Crowdcube Drag Along clause, which states that all shareholders must sell their shares if the majority holding agrees to the sale. The text is below
We, Andrew Robert Veitch, Ryan Lrwin O'Rorke and Kevin Matthew Dorren (the "Selling Shareholders"), together holding a majority percentage of the A Ordinary Shares of the Company, have agreed to transfer all of our interest in our shares in the Company (the "Sellers' Shares") to the Proposed Buyer (the "Sale"). We, therefore, constitute the Selling Shareholders for the purposes of article 10 ("Article 10") of the articles of association of the Company (the "Articles"). Pursuant to Article I O, we, the Selling Shareholders hereby give you, the remaining shareholders of the Company (the "Called Shareholders"), notice that you are required to transfer all of your shares held in the Company (the "Called Shares") to the Proposed Buyer. This notice, therefore, constitutes a "Drag Along Notice" (as such term is defined in Article I O) and is given pursuant to and in accordance with Article I O (the "Drag Along Notice").
No one was asked but they are now having to agree that they will sell their holding - at a massive loss. In fact the email we have seen says absolutely nothing by way of explanation or apology. These 3 geezers are exactly what Crowdcube promotes.
The 3 directors/shareholders of Flavourly have sold all the company's shares to Drinkshare Holdings Ltd. The total sum made from this sale is to be £118k - against the 2015 valuation put on the company at the time by the same directors of £1.2m.
Wait there is more.
Drinkshare Holdings was incorporated in November 2016. It has no trading record. The sole director is one Alistair Duncan Stewart, whose record speaks for itself. The company as yet has no shares issued. Stewart is listed as an investment specialist who seems to get involved in liquidating companies.
So what is going on here?
Why didnt Flavourly follow the normal process and just close down like so many Crowdcube funded companies? This way investors do at least get some money back, but it seems unlikely to us that Drinkshare is going to turn this company around and if it was, why couldnt CC shareholders have a piece of the action?? They did after all hand over in excess of £500,000 to Rorke and his mates. That has all now gone where?
Utter shambles. Or Scam? The 2015 valuation was low to entice £500k into their bank. We have to assume that most of that has now gone. It's all perfectly legal of course....for the moment.
Finally, as a reader kindly pointed out, anyone who claimed S/EIS with Flavourly will have to repay HMRC. Nice.
Wow, they keep coming!
ReplyDeleteI've been saying for a long time, that association with some of the ECF platforms is going to end up being a huge negative to a business, an embarrassment.
Show me a linkedin or twitter profile where someone cheerily boasts that they are into 'crowdfunding' and I'll show you a nice but dumb/easily gullible individual.
I was one of them for a short spell.
I'd happily donate to this website incidentally. 10 out of 10 (again...)
You don't really have to repay HMRC - you just claim loss relief on the rest.
ReplyDeleteThis is exactly the point we have tried to make on this blog - people investing in companies via these platforms are either total idiots or very poorly informed. Because these shares have been bought before the 3 year EIS holding period is up - YOU WILL HAVE TO REPAY ALL THE EIS ALLOWANCE YOU HAVE CLAIMED as this Co is now no longer eligible for EIS. You can loss relief though - which will be some comfort. Do your homework before playing in the minor league please.
DeleteInterestingly, Crowdcube just sent 'round an email encouraging claiming tax relief on the investment, in addition to loss relief.
DeleteAs an aside. Rob, while I appreciate this blog a lot, belittling your readers won't do your credibility any good. Just saying.
Stefan (not the poster above)
That is interesting. Can you send me a copy of the email? If Flavourly closed then yes the EIS would hold. But it's very clear in the EIS criteria that you have to hold the shares for 3 years. Flavourly have or are so doing, sold these shares to another legal entity. IMO opinion therefore all EIS reifs would have to be repaid - any lawyers out there?? If Crowdcube are misleading investors then that is very serious.
DeleteGood afternoon Rob
ReplyDeleteIt would be interesting to hear from Crowdcube on this one especially when Luke Lang recently quoted:
(Crowdcube, in the last year) Partnered with "a market leading information provider" to monitor the health of companies after they're funded
So what exactly has this information provider managed to find in the run up to Flavourly going into administration? What is the process for monitoring the financial health of funded businesses and how often are these checks/monitors being carried out?
This does appear to be a scam. Firstly, customers are being scammed into subscriptions which cannot be cancelled and secondly it appears the plan was to take investors money, grow/promote the business, claim that it's running out of cash fast and then eliminate those investor shares by going into administration and continuing under a new entity.
One Crowdcube investor has lost £50K on this one.
Flavourly has not gone into Administration - that is rather the point here. One would assume that as the company has been sold to the the newco - ie all shares have been purchased by the newco, then they will have to take on the old co's liabilities. Not sure about CC new service but if history is any indication it will be pretty good rubbish. They dont acknowledge our existence.
DeleteAt least someone gets something back I guess. I wish them all well. From my dealings with Ryan & Assean at Flavourly they always seemed like decent blokes trying to run the business to the best of their ability. I invested in Flavourly via Crowdcube, but accepted the risks at the time and cut my cloth accordingly. I still think they could have made it as they were in a good market, with a decent product. It's such a shame they're going out in this manner.
ReplyDeleteHave you noticed that the directors of Drinkshare happen to include Ryan O'Rourke and Assean Shiekh? https://www.endole.co.uk/company/SC549464/drinkshare-holdings-limited?page=people
ReplyDeleteYup - expected. Of course it was left until after the shareholders (like the guy above) had said of well what a shame just in case they said What the F!!Decent gap of 3 months and we are off again!
Delete