In this post I share the technique by which the Bartercard Directors will likely be stripping their companies assets during their public listing. Of course this is immoral, for their current minor shareholders, the taxman and others will all be missing out in due course. Bear with me please as I explain the tricky moves as I see them unfolding.
When the BPS Prospectus was released, I read [all 53,429 words of] it and I got the big picture – Bartercard is getting asset stripped
I’ve wracked my brains ever since however, on HOW the Directors are doing it.
I know about and have blogged about how they have concealed their massive House Account deficit for years – $100m, $200m, or more . . . who knows? Whatever. If the big boys in the global cash economy can do it I guess they feel that they can do it too! This is actually relatively simple – just put it into off-balance accounts and don’t mention it! Hope then, that nobody compares the Credit Balances in the system (which will be HUGE) with the Debit Balances (which will be a vastly smaller), the difference of course being write-offs, bad debts and [cough, cough] perhaps a little value slipped into their own hands over the last 20 years or so!
But stripping assets from a business with the visible intention of making the old company insolvent is lunacy, for the Directors would be clearly liable.
I’m not a corporate Boardroom shark like these guys probably are but the way I’m seeing it pan out is to have a strategic sell off of the assets, where anyone looking from the outside would think it is being done to make the old company look viable.
I think that they are probably packaging the assets, then selling them back to BPS Technology, then leasing back the rights to trade under the Bartercard name and to use the software. This therefore would create a hollow ship in the old company and the deed would be just about done.
I asked BPS Technology for a copy of their actual Agreements. No dice. They’re confidential between the parties. Yup! Just like all other Australian Public Company Agreements [not!].
From: Dennis A Smith
Sent: Wednesday, 13 August 2014 1:21 PM
Subject: Documents referred to in the BPS Technology Prospectus
Can I please have a copy of the following documents referred to in the BPS Technology Ltd Prospectus?
9.10.2 DEED OF PURCHASE AND ASSIGNMENT
The Deed of Purchase and Assignment under which BCIB and BCIA will transfer to BPS Technology the Bartercard Management Systems
9.10.4 BUSINESS SALE AGREEMENT – AUSTRALIA
The business sale agreement for the purchase of the business operated by BCA, including the management of the Bartercard Trade Exchange in Australia, the Bartercard Franchise system operating in Australia, BCA Trademarks, all corporate stores, all the assets and liabilities used in the business
9.10.5 BUSINESS SALE AGREEMENT – UNITED KINGDOM
The business sale agreement for the purchase of the business operated by BCUK, including the management of the Bartercard Trade Exchange in the United Kingdom, the Bartercard Franchise operating in the United Kingdom, all corporate stores and all the assets and liabilities used in the business
9.10.6 SALE AGREEMENT – NEW ZEALAND
The NZ Partnership Interest Purchase Agreement, the NZ Share Sale Agreement, the BCIB Partnership Interest Purchase Agreement and the BCIB Share Sale Agreement.
9.10.7 SHARE SALE AGREEMENT – USA between Bartercard Group Pty Ltd and Barter Futures for the purchase all of the shares in Bartercard USA Inc
9.10.15 IRTA AGREEMENT
The Barter Software Agreement and Agreement for Leasing Barter Software to third parties between BPS, Tess, UCC and IRTA
Info replied to me today:
Info via dennis.co.nz 13:35 (10 hours ago)
“Thank you for your email. We are unable to comply with your request for copies as the documentation is confidential between the parties.”
In order to get it to make sense to me, I asked a minor shareholder in Bartercard to fill me in on this very issue. I got confirmation of this little scam possibility here:
… the letter that Simon Barker sent to [Bartercard] shareholders specifically state:
“certain of the companies subsidiaries have been approached by BPS technology limited to purchase a number of the companies operating businesses and assets ……… subject to a successful IPO BPS has entered into a series of contracts with various subsidiaries of the company to aquire the businesses and intellectual property rights of the Bartercard operations for 6.5 million AUD.”
Right, so the key word here appears to be ‘VARIOUS’.
It seems they are cherry picking the asset based subsidiaries and leaving the rest behind. They are not buying Bartercard lock stockand barrel!
Wow! Should they have let the public know this a little more clearly?
Or perhaps been a little more honest with the investors in those old companies who will now be left out of pocket?
What about the taxman too? Is he happy about this transaction?
I’m not a forensic accountant, I just ask questions and think, but these guys are clearly up to no good. So I tried to get some communication with the guys that checked out the dodgy Prospectus:
Could you please make contact with me to discuss concerns I have in regards to the quality and completeness of the financial information in the BPS Technology Prospectus?
Their Investigating Accountants just didn’t want to talk about it either. I had a bunch of questions but it seems their Prospectus is all honky dory and is all we need in order to assess the whole BPS Technology/Bartercard thing because just 79 seconds after ‘Info’ told me to go away, Mike Traynor replied to my request to talk:
Mike Traynor via dennis.co.nz 13:36 (11 hours ago)
Dear Mr Smith
We draw to your attention that the prospectus you wish to discuss is in the Public Domain and the Offer is open.
It is our policy not to comment on such documents.
Please note that I am the investigating accountant to the offer and as such have prepared an investigating accountants report which is included in the prospectus at section 8.
This report outlines the nature of the work which was conducted on the financial information disclosed in section 4 of the prospectus. We also disclose in this report our conclusions on the veracity of the Pro Forma balance sheet and forecast financial information.
Mike Traynor, Partner, Corporate Advisory, Pilot Chartered Accountant
Thanks Mike. I actually knew all that, because I actually read the Prospectus, every word of it, much of it more than once . . . that’s why I have questions for you, actually!
- When you confirmed projections for income based on fees, you based this on the FULL LIST PRICE of the fees. Did you consider the possibility that not every one of the projected new members actually pays the full list price? Did you consider the possibilities of discounts or deals? Did you even ask for ACTUALS from the current trading, which when you compare income from fees divided by actual income does NOT validate the Directors’ wild projections!
- Likewise with income projections from Membership sales. Did you consider the possibilites of discounts or deals?
- Did you have knowledge of current trade deficit? How did you ummmm . . . . ‘ignore’ that few hundred million dollar liability?
- In regards to your validation of the IRTA endorsement/agreement . . . did you have any questions or perhaps alarm bells that your clients’ entire business projections were based on an exclusive endorsement from a supposedly reputable industry Association that ethically should and probably can not provide that very exclusivity? Did it cross your mind that this ‘too good to be true’ scenario might be a little ‘too good to be true’?
- Were you aware that the ultra short time-frame from announcement to close of the Offer indicated that there was already agreements in place and that the IPO was a sham, for show?
- Did you view and were you in possession of the historical figures on the company they were buying when you conveniently ignored five years of reducing sales, memberships AND profits, or was that not important when endorsing not just simply a slightly elevated positive projections but more of a wild pipedream and miracle turnaround?
I guess if BPS Technology had deals in place and your bill had/has been paid then none of this really matters eh?
The net result of Bartercard’s latest corporate tweaking is that it operates on a two tiered management structure, one company is ring fenced and then taken up (Bartercard Exchange), the other company (Bartercard Management) is left behind and therefore it is the manger that has the trade debt obligation.
As I see it, all the related party debt and bad loans will then just get carried forward in the ether!
The result as I see it is that all the profits of the old company are now stripped out in lease costs (in essence this looks like a sale and lease back therefore all future old company profits are stripped out in lease costs) and they then will allow it to run as long as it needs to to create distance between the old company and the new company. When enough time has elapsed they will scupper old company therefore ‘losing’ the old company debt.
Tricky eh? Wish I could find a way to get rid of debt so easily.
There’s a Right of Reply on all my blogs if I’ve got anything wrong but I doubt that with their responses they’ll bother with it. The scenario above will then stick.
You heard it here first!
In my next post in this series (called: Hiding the Bartercard Skeletons) I will share the issues that the industry faces in keeping these skeletons in the closet and give commentary on concerned feedback that Bartercard’s demise could negatively impact on the industry. It could but it need not.
The Barter Series
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