Wednesday, 9 November 2016

Red Advertising planning new funding - what you might want to know before you invest!!

Red Advertising have funded 4 times on Crowdcube - each time they failed to come even close to the projections they have published. That's FOUR times in case you missed it. 


Here is the evidence from Crowdcube's own site - 


Crowdcube Funding History
Date
Amount
No. of Investors
12/02/2014
£484.35k
86
05/07/2013
£180k
35
20/09/2012
£97.49k
49
16/02/2012
£125k
64

So where do we go from here?

Well Red Advertising are about to launch a new funding round , according to the email sent to shareholders by CEO Richard Clarke. The email states that they are currently in advanced discussions with VCs Concentric Capital and the ECF platform Envestors. Envestors when we spoke with them said that they had been approached last week by Red and had asked for more information - advanced??

That aside, it would be fine if Red Advertising was raising more cash if it could be trusted to be straight with the information it provides, especially as this email is asking existing shareholders to cough up more money. Accumulated losses to YE May 2015 are over £1.5m against Crowdcube projections which from the raise in 2014 had them making profits of around £3.8m by now. 

More worrying is the failed attempt at the end of 2015 to raise P2P finance via Thin Cats - a company they had used twice before. In the Thin Cats prospectus which we have, is the following declaration of previous funding - 

Equity:-
In March 2014 the business completed a £ 485,000 share placement led by Johnson Capital, the company’s corporate advisors, including existing investors and new crowd investors via CrowdCube.
That is it - no mention anywhere of the other raises on Crowdcube  - of course it's very possible Crowdcube's records are wrong but we dont think so. Johnson Capital sounds very grand but its just a small FS company with called up share capital at the time of £10, that Red claimed in the Crowdcube pitch was a VC outfit. At this time the pitch also appeared on Syndicate Room but was taken off by the platform because of a discrepancy with its EIS status. There was an interesting and telling exchange between the CEO and an existing shareholder on the Thincats forum. The shareholder wanted to know if the company was close to its Crowdcube 2015 EBITDA figures - the CEO declined to answer the Q. 

We have written quite a bit about this company and have been threatened by them  - they seem to us to be one of the main problems with ECF. The information supplied to investors is never quite all there. It's always slightly skewed. Projections as pure fantasy.

Now it maybe that the 2016 accounts, not due for a few months, will show that Red has turned a corner but if that was the case, wouldnt you think that the company would want to get those accounts out now - before they try to raise more money. The YE was May 16 so it cant be too difficult to get them prepared if they are serious about an open approach to this raise? Hell if I had profits to show after £1.5m of losses, Id be getting them out there!

There is no mention of any profits in the shareholder email, just a request for more money. The shareholder who sent it to us says that they only ever get in touch when they want more cash.

Caveat Emptor!! Or should that be Mickey Mouse.

BREAKING NEWS 15.35 09/11/2016 - Envestors now tell us they are not taking a deal with Red any further. But do shareholders who have been told that the deal is at an 'advanced stage' know this???

1 comment:

  1. Oh boy, this is so typical for this industry. Very well researched and thanks for sharing.

    ReplyDelete