Wednesday, June 17, 2009

Charlies Group: A Triumph of Style over Substance

There was much fanfare, overwhelming hype and plenty of free publicity when Charlies Group [CHA.NZ] listed on the NZX through the back door in 2005 and that has been the way the company has operated for the last 4 years.

They had Marc Ellis as its largely titular head and Stefan Lepionka in the back room squeezing the juice and running the business side.

Shareholders who got in at the entry point have lost millions and are unlikely to get it back and many of these same people would have participated in the 42 below IPO a few years back expecting Charlies to pay back the same way that deal finally did.

We have learnt that the company is looking at raising capital in some way to enable them to continue to function as a going concern and their original idea to build up the company to sell it off to a major beverage player has failed because they cannot get what they think it is worth in the current economic climate.

Burger Fuel Worldwide [BFW.NZ] which is contemplating capital raising itself, is another one of those flash harries that investors got hyped up in and ended up largely kissing goodbye to the 2 million that was raised from them in that particular IPO in 2007.

These companies all share a sense of style over substance and should be avoided at all costs by those without money to lose and that should be pointed out clearly before virgin investors plunk down their cash.

The fact that these sort of IPOs were pitched to those without much financial nous and got caught up in the hype is a testament to Kiwis lack of financial skill and those that were raising funds were counting on when they targeted the financially illiterate for their hard earned moola.

Fare enough for Ellis & Co to take a big risk in business but to pitch there IPO without spelling out there was a fair chance the business would fail is, once again, a triumph of style over substance.

Footnote: Charlies have just issued a press release to the NZX softening up shareholders for more money.


Charlies Group @ Share Investor

Takeover Documents

Charlies Group Ltd: Asahi make takeover offer
Share Price Alert: Charlies Group Ltd
Share Investor Q & A: Charlies Group CEO Stefan Lepionka
Chart of the Day: Charlies Group Ltd
Charlies Group: A Triumph of Style over Substance
Charlies juicing through Shareholder cash

Discuss CHA @ Share Investor Forum
Download CHA Company Reports

From Fishpond.co.nz



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2 comments:

  1. What role do you think the NZX could or should play in vetting companies that want to place IPOs.

    If they had stricter guidelines do you think this would have helped stop the Charlies placement( or Burger Fuel for that matter)

    I get the feeling some companies view an IPO as a right rather than a privilege.

    Cheers

    ReplyDelete
  2. What a vexed question anon, it deserves a column all its own!

    The Charlies/Burger Fuel IPOs definitely should have gone ahead but with more protection and clear disclosure for prospective participants.

    Both IPOs emphasized positive aspects of the 2 companies and made them the main focus to grab investor money while largely ignoring or burying the huge negatives in large amounts of fine print or in over complicated language.

    If the large risks were pointed out-they clearly were not-then any investor who then put their money down would have deserved to lose what they invested.

    The NZX and Mark Weldon have unfortunately shown little interest in putting in the necessary belts and braces preferring of course to get the fees and ongoing income from listing as many companies as they can.

    ReplyDelete

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