Im concerned that their business model doesn't actually work.
My issues with Blue Sky:
Capital for seeding funds.
They require capital to seed the funds. Before BLA was listed the MD used to provide those seed funds - Today, those seed funds are provided by BLA the entity. At the rate they are going thru capital, they will not have enough $ to continue to seed funds, if they don't seed new funds, they will not grow and will slowly shrink as their funds mature and they cannot maintain the momentum to raise new funds.
Historically they have not worried about this as they booked a healthy profit (albeit not realized) and could continue to do capital raising. That avenue is now off the table, accordingly they will need to either form a partnership with somebody for the $ or raise capital again. I don't see anybody wanting to partner with them given the credibility issues and in terms of raising capital, they would need another $100 mil, which would dilute the shareholders by about 50% at current market cap - even then that would only give them another year at best.
Business Model.
I'm not convinced they can run a profitable business model without the inflated fund profits. I don't believe that there will be buyers for a lot of their products when finished at the valuations (similar to what happened with the child care venture). Accordingly the performance fees will not be there to prop up the business or able to be used to seed new funds.
Credability
While many in this forum believe that the AFR are running an attack campaign on BLA, what they don't understand is that the AFR's contempt for BLA comes from a place of experience. They have seen the double speak before, they investigate this for a living and the contempt for BLA is not isolated to AFR, a lot of the larger institutions are also now skeptical. So yeah, the future funding potential for BLA is getting murkier and murkier.
CASH
Businesses that cannot generate cash fail. BLA is not generating CASH sufficiently to survive. They shouldn't be burning thru 90 Million in 6 months with no growth of FUM. Lets step back and have a look at their performance over the last 6 months. Lower FUM, 90 Mill cash down the drain and negative profit adjustment larger than all of their profits since listing.
All of my assumptions are based on the information that BLA have released to the market. The next date for real information will be August with the annual report, that will tell us three (3) things:
1. How they propose to disclose their accounting (ie breaking up into categories or just "fees"). This will be a decider for how much they want to open up their actual performance.
2. CASH - how much cash they still have in August.
3. Recurring operational costs. They need to get their operational costs down to under the recurring management fees. This is critical.
BLA Price at posting:
$1.42 Sentiment: Sell Disclosure: Not Held
