Wednesday, 23 May 2018

Sugru's filed accounts reveal what their 2017 Crowdcube pitch failed to.


As we keep digging, we keep finding. 


Crowdcube investors in March to May 2017 were shown the 'projected accounts' for the company's YE Dec16 in the pitch documents - ie they were actuals. These showed a reasonably healthy current account balance of £1m credit. 

Now the filed accounts, which remember were for YE Dec16, so had already been completed 5 months before the Crowdcube pitch closed, show a very different story. These accounts were not made public until December 2017, so there is no way that anyone outside the company other than Crowdcube, would have known the real figures.

These accounts show a current account deficit as at 31 December 2016 of £337,528. 

This difference of £1,337,528 is around the amount that the company states it was due from the Clydesdale, in the second tranche of their agreed loan. The one they had breached but hadnt told people about - the one the bank withdrew which resulted in the fire sale.

That seems pretty clear to us. Crowdcube told investors the exact opposite of the truth in the 2017 raise. Maybe this was because Sugru hid it or maybe not. Either way it shows Crowdcube's due diligence is totally worthless. 

10 comments:

  1. Was approached to look at raising capital for this business just before they went on Envestors (remember it's not just Crowdcube here...). An hour and a half in East London would tell you that the business wasn't scaleable with the team and resources they had at their disposal. Great product, wrong cap table and wrong team... Arguably acquired at the right valuation and thankfully the product now has a chance of success which is what it deserves. I wonder if Crowdcube or Envestors actually ever visited the premises and spent time with the team. Politely declined...

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    1. As so often the designer/creator is not the best person to take the business side forward. But there are larger issues here - looks like the 2017 Crowdcube round failed to disclose some very important information about the £3.5m Clydesdale loan. As a result more Crowdcube investors lost money than should have done.

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  2. We keep on being told about Crowdcube's due diligence. Isn't this an opportunity for them to set out what their due diligence in 2017 revealed about Sugru's financial position and in particular the breach of the bank's covenant. Sugru have accepted that the breach was not reported to the crowd in the 2017 raise (saying it was not a "material breach" whatever that might mean).

    If Crowdcube made the decision not to disclose the breach then this was a shocking dereliction of duty to their members.

    Answers need to be provided promptly to the legitimate questions that have been posted on this blog, on the Crowdcube forum and on twitter.

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    1. We have not seen Sugru's admission that there was a breach before the 2017 CC raise - where is that to be found? We know there was as its in the accounts. For them to claim it was not a material breach is very odd. According to the audited accounts for YE Dec2016, the breach resulted in the bank moving the 3 yr loan(over 2 years remaining) of £2m(drawn down by the company) from LT liabilities to ST liabilities - thereby creating a net CA liability of over £300k when they claimed it was £1m in credit. That seems material enough to us! To be honest the management at Sugru were so clueless I doubt they knew what material means. At least now the creation of this product has a good chance of becoming a success.

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  3. Hi rob, they have admitted that on the Crowdcube forum. This is what they say:

    the December 2016 breach was not a material breach and was not specifically called out in the Explanatory Note posted during the 2017 raise. The amendment of the covenants discussed in the explanatory note related to the timing of the CrowdCube cash coming into the company. The material breach that caused the problem was in September 2017.

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  4. Materials lesson Sugru style?

    mouldable,flexible then sets hard
    +/- finances - flexible till someone finds out

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  5. As one of the losers here, not a huge amount, but at an irritating level all the same, is there an opportunity to take action against Sugru and Crowdcube? Both of whom I have lost total faith in. I would be happy to ruffle a few feathers, this behaviour cannot go on. It is fraudulent and / or negligent in my view now. 50% of all my investments through CC have gone now in under three years.

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    1. Watch this space - we are still digging and we may have found gold - well you know what I mean! This one aint over yet.

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  6. It would be interesting to know whether the Board and the company's advisors considered a rights issue at 9p a share rather than simply screwing its minority shareholders. Jf

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  7. You cannot help yourself Rob can you?......but I await with interest!

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