Personally, I think agitating to change management/directors is a total waste of time, because by the time that fight is fought, at the every earliest, it will only happen by the AGM (and that's IF it even transpires).
And then there's the time needed to recruit a new executive team.
Also; let's face it, what calibre of manager(s) are going to be willing to get involved in a pico-cap company with SP3's current lack of free cash flow traction and funding challenges?
Even if - by some miracle - a new, gun management team can be on-boarded, it will take it time to contemplate, and implement, whatever new strategy is deemed appropriate.
And then it will require time (a few quarters, at least) for the evidence of the success of the new strategy to manifest itself (and that's IFit is successful; there's no guarantee of that).
So calling for the axing of management is a bit naive and reflects a position that really hasn't thought through the practicalities.
The time for shareholders acting because they felt management were not of the right mold was two years ago: it's too late for that now.
The company's financial position today doesn't afford the luxury of another 12 months of a new strategy; the end game is already upon us.
Personally, I don't think management is the problem here; I think the CEO is energetic, cost-conscience and has tried a number of different things to drive sales, most which have had limited success which is why the company finds itself where it is today.
But I don't think that's the CEO's fault: I think its the business model which is fundamentally limited: they're essentially selling and renting out widgets. And widgets take money to make.
Even though it has been the objective, not much about SP3's revenue model takes the form of a set-and-forget SaaS platform. The addressable market simply isn't that big and even if it was big, customer acquisition costs are high. (I some months ago conducted a crude LTV/CAC estimate and it wasn't overly rosy).
So if there is blame that needs to be apportioned, then it should be in the limitations of the business model: I think investors in this company thought the product and/or service offerings were more attractive and have more commercial application than they really have.
But no point in debating that because its moot, anyway: the issue is what needs to happen now.
I've always been of the view that the business model isn't a great one, but what attracted me to the company was it's mere few million dollar market value which I saw offering two option paths (each with equal probability of happening) to value creation, offset by some probability that the company simply isn't going to make it:
Outcome Probabilities - At the Time of The Last Capital Raising:
1. Reaching commercial self-sustainability (60%-65% probability)
2. Selling the business to a related industry incumbent (30%-35%)
3. NGMI (5%)
Fast forward to today, and the time value of Outcome 1 is running out fast. (There is certainly not enough time value in that option for a new management team to start again!)
So now my mind's eye is seeing the situation as follows:
Outcome Probabilities - Current:
1. Reaching commercial self-sustainability (5%-10% probability)
2. Selling the business to a related industry incumbent (60%-65% chance)
3. NGMI (25%-30%)
In summary, today the outcomes are probably still binary but, unlike before, today one of the binary legs is a decidedly negative one.
Which is why I firmly believe that, should shareholder blocs be formed to agitate for some kind of change, then it should be to formulate a clear brief to the company's directors to mandate a merchant bank/business broker to sell the company, pointing out the reality that capital market doors have effectively now closed to this little company.
Because it has now been confirmed to me that this business is highly likely to have more value in the hands of a new corporate owner (which will be able to strip out $1.5m to $2.0m of duplicated overheads, which will take the company into profitability straight away), than it will be as a publicly-listed entity.
That certainly is the representation I intend to make in coming weeks to the Chair, the MD and the NED.
.
Expand
