Vmoto/Soco?

I've taken a step back from this platform over recent months, although I have still been researching the stock and keeping tabs on the discussions on this forum.

I decided to stick my head above the parapet today, as I feel there is one issue that might be being overlooked on the recent threads of this forum, and it also ties into some of the research I have been doing on the company.

For those who didn't notice, last week, Super Soco released a statement in relation to the recent EICMA event in Milan, essentially saying that they didn't authorise the appearance of the brand at the event, seemingly disputing the terms of the agreement that was signed between Vmoto and Super Soco in early 2020.

This issue has been mentioned on the forum before, and so it isn't completely novel to those who are regulars on this forum. Most here would be aware that the management of the company have responded previously to the allegations by the Super Soco group, stating that there is nothing in the claims, asserting that they have a solid legal position in relation to the international distribution rights of the Super Soco brand.

As far as I can tell, it would seem that Super Soco appears to have become a little disgruntled about the international acclaim of the brand, given that the kudos from the Super Soco abroad has been flowing not in their direction, but over to the Vmoto Soco group.

I get a curious sense of deja vu in all of this. It is interesting to note, that after the Vmoto founder, and the first managing director, Patrick Davin resigned a decade ago, one of the first moves by the fresh MD, Charles Chen, was to reorient the focus of the company to China, which ultimately proved to be a commercial cul-de-sac.  

After spending years in the wilderness, they entered into a partnership with Super Soco in 2017, and from that point on, the company pivoted away from China, to focus on international markets. Super Soco seemed content to focus on the domestic market.

The two companies jointly presented at the 2017 EICMA event. Here's a picture from that event, showing Sherman Xie of Super Soco, in the middle, surrounded by a bunch of executives from Vmoto, all sticking their thumbs up for the camera.


Nah, doesn't look at all like there is some kind of partnership going on there.

I am being a bit flippant here. But still, it is curious to note that Sherman Xie seems to have wandered down the same track as Charles Chen years before.

In 2017, Xie seemed keen to focus his attention on the familiar Chinese market, and was apparently content to let others focus on the international market, in a similar manner to Charles Chen just over ten years ago, when he first became MD of this company. And just like Chen before him, after several years, it seems that Xie has realised his mistake, which, presumably is what is behind Super Soco's recent apparent attempts to reassert some control over the international market.

Most of those following this forum would be shareholders, and naturally we will have something of a bias when reading those claims put out by Super Soco.

But it might be instructive to play as 'devil's advocate' for a moment.

Patrick Davin, the founder of the original Vmoto brand, resigned as MD in 2010, shortly after Charles Chen joined the company. After this, most of the old guard in the company followed in the footsteps of Davin. Curiously, the only Australian director who has stayed with the company over the long-term was Shannon Coates, the only female director.

As noted above, in 2017, Vmoto and Super Soco entered into a partnership. Now it seems that Sherman Xie and the Super Soco crowd want out.  

The point I am making is that there seems to be a bit of history repeating here. Ten years or so ago, the Australian old-guard moved out after Charles Chen joined the company. Now, it seems that the new Chinese partners are out the door.

In this, one question comes to the fore, namely, is there a 'Charles Chen' issue? Perhaps he has a domineering personality, and is difficult to work with?

That in itself may not necessarily be a bad thing: Steve Jobs was apparently difficult to work with.

But there is a second question that I find a little harder to brush aside.

The management of the company have insisted the claims of Super Soco, detailed in the release last week, don't hold any water. And maybe that is right.

But I find it difficult to reconcile the assuaging words of the management with some moves made by the company over recent months.

A couple of months ago, a banner appeared at the top of the Vmoto Soco website: Copyright 2021 Vmoto Europe BV – A Sole Shareholder Company of VMOTO LIMITED - A Company subject to the Management and Coordination activities of VMOTO LIMITED. All rights reserved.

When I first saw this, I assumed this was an attempt to highlight the link between Vmoto Soco and Vmoto, thereby (hopefully) transforming some Super Soco fans into Vmoto shareholders.

But after reading the statement put out by Super Soco last week, I am starting to wonder if the appearance of this banner is more defensive in nature, an attempt to ring-fence the Vmoto relationship with Super Soco against the claims of the eponymous company.

That might be innocuous, in itself. But then, we've also seen a concerted effort over recent weeks to promote the Vmoto brand at the expense (it would seem) of Super Soco, a move, which I might add, seems to have been quite effective. Certainly, the Vmoto Stash seems to have garnered plenty of attention in the automotive press.

So this leads me to my second question: if Vmoto's distribution rights over Super Soco are water-tight, as the management seem to be suggesting, why is it that they seem to be running a mile away from the brand?

Personally, I think it is a good idea to promote the Vmoto brand, and to my eyes, the Stash looked like it might offer some promise. But I find it curious that the attempt to promote the Vmoto brand seems to coincide with the divergence of Super Soco and Vmoto.

Prior to the last statement that was put out by the company, Super Soco released another statement on the 19th of November, announcing that they had moved to a new office, one with a Super Soco brand prominently displayed, I might add. Almost a declaration of independence, or so it would seem.

Almost exactly a week later, on 25-28 November, Vmoto seem to have transformed the EICMA event in the Milan into a launch-pad, hogging the limelight to promote their new-look and their new premium brand.

Could it be that Vmoto are deliberately pushing the envelope, using the prominence of the Super Soco brand to help debut the new Vmoto look? Perhaps an insurance policy, in case they lose the right to distribute Super Soco internationally?

As an aside, on the assumption that there is some kind of cloud hanging over their international distribution rights, the move to use the high-profile ECIMA event to promote the Vmoto brand would seem to be quite wily,  assuming there isn't going to be any fall out.

All this is speculation, of course. And my musings could be wrong.

But one other question around this that strengthens my suspicion that shareholders are being kept in the dark about something. I would refer you to the original joint venture announcement of 24/02/21 ('Vmoto and Super Soco to establish new manufacturing company')

If you run through the key terms of the agreement, down on the last point, it states: 'The agreement is governed by the laws of the Peoples Republic of China and contains standard liability and indemnity provisions for breach...'

Judging by the statement that was released by Super Soco last week, you would have to assume that there has been some kind of divorce between the two companies. So then, why is it that we haven't heard anything about the 'provisions for breach' as mentioned in the original agreement?

What I'm trying to highlight here is that it seems that the company is not being entirely transparent about the change in the relationship between Vmoto and Super Soco.

Normally, you'd think that the company would need to release this as per their Continuous Disclosure obligation. Keep in mind, however, that Treasurer Josh Frydenberg, in his wisdom, decided to water down the continuous disclosure laws back in August. Effectively, it now is less risky for companies to keep mum on important information.

If there has been some kind of divorce, while this wouldn't be good news, I don't think this would be a disaster. The Vmoto market cap is pretty modest, and it seems that Vmoto have managed to steal the spotlight from Super Soco at the big event at Milan, gaining some glamour at the expense of the queen bee.

But if there is uncertainty around the distribution rights, that could pose a problem. Even if Super Soco's claims don't hold much water, the uncertainty could put off some customers.

In closing I should mention that I am still a shareholder, and have hardly sold any of my shares since the start of the year, and indeed I'd prefer not to, as I like the company. However, I am getting a sense that shareholders are not being fully appraised about the details of the partnership with Super Soco, and I feel that the company needs to be more transparent about whatever it is that is going on in the background.