Tuesday, 8 August 2017

Troubles at Enistic highlight the poor Crowdcube model

Enistic raised £340k on Crowdcube in 2104. Now they are struggling with mounting losses, huge founder pay packets and resigning directors.

So how does a new company making losses justify a salary of £150k to its founding CEO. Well is cant but there is nothing Crowdcube investors can do about it.

We wrote about Enistic here when they suddenly withdrew their second attempt to take Crowdcube investors for a ride. Thet were not well received the second time.

Now information we have shows why. The CEO, Darryl Mattocks, has been taking £150k pa out of the company by his own admission. YE March 2017, the company reported losses of over £100k - ie his salary. He hasnt broken any laws, its just plain stupid. Investors did not put their money into the company to pay for his lifestyle.

A recent resignation by one of the non exec directors has led to the revelation that things are not well at the company and there have been some interesting goings on. We wont go into these here, suffice to say that they are not in the interest of Crowdcube's shareholders and it also involves a service contract which appears to be against the interests of Enistic.

So we comeback to the title of this post. How can Crowdcube investors assert any from of meaningful influence on rogue directors, once they are shareholders? Simple answer is they cannot. The first Crowdcube pitch raised almost 3 times the amount sort. So investors were enthusiastic. The March 17 accounts show little cash remains and assets total £119k, even after the company raised more finance last year. Someone has benefited but it is surely not the investors.

5 comments:

  1. Hi Rob,

    Always a pleasure to hear from you :)

    My wife would be very happy if I took out £150k come rain or shine and, in fact, has often asked why I went into a career where reward such as this were guaranteed and not into the “feast or famine” world of entrepreneurship. I'm the one that generally opens the office in the morning and locks it again at night. I work long hours and wish that my salary were a cosy, safe, guaranteed £150k pa but at the moment, the company cannot afford or justify this so I've not taken *any* money out of the company for the past 3 months. Zip, zero, zilch. Prior to that, I worked for many years without *any* salary. Such is the life of the entrepreneur, I chose it and would choose it again in a heartbeat but it certainly does not pay me £150k regardless of the company's trading or circumstances.

    With the recent transition of Enistic into Enistic Green Capital, formed via the injection of a £2.5 million funding round into a new 50:50 JV, and with revenues expected to be in seven figures I hope that Enistic investors will get back a great return from their initial investment. Enistic Green Capital's success is not guaranteed, but it has got off to a tremendous start and the future looks hopeful.

    I note the points you make though and feel the need to respond to the inaccurate accusations raised by the NED who stood down. It’s probably not true to say that we parted on good terms and he has certainly been vigorous in presenting a version of reality that is distinctly different from that of either myself or the company lawyers. We send out shareholder updates every quarter and the next one is due, coincidentally, in the next 2 weeks. In the update, I'll lay out to shareholders the steps we've put in place to grow shareholder value, the promising results of our new R&D initiatives, and lay out transparently what money I draw from the company. Shareholders will then have all the facts in front of them and can make up their own minds.

    I have stuck in the back of my mind that whatever I say now you’ll class as “hogwash” but I hope the sentiment of what I’ve written sinks in here. The team here are simply working our hardest to make the company successful under what has proven to be very difficult circumstances. This success is not just for my own benefit but for the benefit of all shareholders. People put their faith in me and it is not my intention to let them down.

    Best,
    Darryl Mattocks

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    1. Thanks. Not sure this adds much by way of facts though. You did take £150k out as a salary from a loss making business funded by shareholders - one year or 10 years, you still did it. No salary for 3 months, oh dear. The whole contract set up looks very odd yet you have chosen to gloss over this here - ??. The sentiment is well noted but sentiment does not not replace facts.

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    2. As a shareholder I am very interested to see how this develops. Darryl has, in all fairness, always delivered quarterly updates which is refreshing as the other CC funded companies don't deliver anywhere near as much info (honest too). He's always struck me as someone who does care.

      The email from the director is certainly a concern however. The director had nothing to lose and could well have left and said nothing but the fact he reached out to everyone demonstrates that something is ethically not right. The points he raises are spot on and pertinent.

      Darryl, why have you not registered us at companies house for the Enistic Green Capital yet? This was announced in November 2016. You sent us emails stating that we would be awarded with share certificates 7-14 days later but in the absence of this registration and our share certificates you are certainly breaching your fiduciary duties.

      At this rate you'll stand to lose everything along with our 'shareholder value'.



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  2. As another shareholder I welcome Mr mattocks promise to be transparent regarding what he has taken out of the company. Will he show his gross payment for each of the 6 months prior to him ceasing to take payment in the last 3 months. Will he show his 2017 P60 and his 2016 P60. Will he tell us how much money he has invested in shares, rather than company loans? I look forward to his shareholder letter.

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  3. As a shareholder in Enistic, I find this news deeply troubling. I read Darryl's updates about Enistic Green Capital and have to admit I was enthused about the idea. Darryl, perhaps you can give us a full update in the progress of EGC ? . That said I'm concerned about rumours of Enistic "investing" "our" money into a new Darryl venture. The last shareholder update spoke of the internet of things ...... most of of all I'm worried about losing my EIS tax status due to the actions of what Wouk seem like an increasingly rogue MD.

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