Ann: Trading Halt, page-51

There are three questions hanging over OBJ.

“Why have the new directors, who are not major shareholders in the company, taken an interest in it?”

“Assuming that their interest is not merely charitable, how will they be rewarded?”

“How is OBJ going to fund Wellfully?”

We know that Steve Schapera has interests in London Labs and that he is also active as Steve Schapera is a Managing Partner of Capital D.

"Capital D is a pan-European private equity fund manager focused on investing in companies that show clear evidence of transforming legacy business models or have demonstrable potential to do so."

In turn Capital D has taken a majority stake in Invincible Brands.

"Capital D, a London-based private equity manager, acquires social media influencer-led marketing and product development company. Invincible Brands, founded in November 2015, achieved more than €30 million in revenues in 2017 with healthy profitability. Capital D advised the shareholders of Invincible Brands on this transaction.

Berlin-headquartered Invincible Brands has sold a majority stake to capital D, a newly-formed pan-European private equity manager investing in mid-market leading companies which disrupt legacy business models. Founded in November 2015, Invincible Brands has accomplished exceptional growth. The company sells its products from Germany into continental European markets, employs 80 staff and serves a customer base of 500,000 millennials.”

“Invincible Brands is a pioneer in social media influencer-led marketing to millennials who are now the largest addressable consumer group in the world.

It creates innovative, high quality and natural health, beauty and fitness products from the ground up, using proprietary product development methods and a marketing platform that reaches more than 100 million women and men across the world on social media every month. Invincible Brands’ influencer marketing campaigns are mainly delivered through social media such as Snapchat.”

So how is it likely to pan out?

Re Question 1

Like everyone else the Directors interests are unlikely to be solely charitable.

Questions 2 and 3

In recent times, OBJ appointed Tony Varano as its Chairman and told us that he and Steve Schapera worked together to sell BECCA to Estee Lauder.
It also appointed John Poynton as a corporate advisor, but not much has been said about why that was done.

The following is speculation but the situation may well play out as follows.

A company, (call it “X”), in some way connected to the Board, which specialises in the internet marketing of “innovative, high quality and natural health, beauty and fitness products” is taken over by OBJ. X is well cashed up and is in a position to provide the working capital needed by OBJ to carry out its new internet marketing campaign.

X has a valuation which is more than the current Market Cap of OBJ.

Because OBJ has no money, it pays for the new company by issuing shares in OBJ to the existing shareholders of the new company.

It is a “reverse takeover” with the end result that, after the new shares are issued, the shareholders of X end up with a majority shareholding in OBJ.

The end result is that OBJ will be funded by a Board which has the skills needed for new age cosmetic and hair marketing.

A by-product is that the existing shareholders will suffer something like a 50% dilution.

Would the existing shareholders wear the result?

My guess is that they would because there is no other way of funding the marketing exercise now under way or of locking in a Board with the necessary skills and money.