- Online wine retailer Vinomofo says Glaucus Research comments about its business are “inaccurate” and “outdated”.
- Glaucus had criticised Blue Sky for increasing the book value of the $25 million it invested in Vinomofo when the retailer was “likely run out of cash without further investment”.
- Vinomofo says it is now at break-even, and is in a “in a good place” with an exciting future as a global brand.
Digital retailer Vinomofo says research on its business by the short seller Glaucus Research, and referred to in its note on fund manager Blue Sky, is inaccurate.
While Glaucus says the wine site will “likely run out of cash without further investment”, Vinomofo says it is now a break even business, reinvesting profits into marketing and growth.
Glaucus, a US-based short seller whose note on Blue SKy sent its shares spinning, also made comment on some of the fund manager’s investment’s.
Overall, the short seller alleges Blue Sky wrongly calculated the value of assets under management and charged exorbitant fees. This is rejected by Blue Sky.
Among the assets held by Blue Sky is a holding in Vinomofo, a well known online wine retailer, in which Blue Sky invested $25 million for a 22.7% stake in February 2016.
Glaucus says Blue Sky claimed a 9.3% return on that investment in December the same year.
However, the short seller says Vinomofo was “struggling to grow and hemorrhaging cash” and didn’t appear to merit a markup in value.
“Yet Vinomofo soon missed its forecasted revenue targets (despite doubling its marketing expenses) and continued to burn through cash at an alarming rate,” Glaucus said in its note about Blue Sky.
“Publicly available financials show that Vinomofo’s cash flow from operations was negative $6.3 million for FY ending June 2017.
“By June 2017, Vinomofo only had $2.2 million in cash left. At that run rate, Vinomofo will likely run out of cash without further investment or financing.”
Blue Sky, in its response to the Glaucus note, said Vinomofo grew materially in that financial year and that its valuation was reviewed by KPMG, a standard process.
Andre Eikmeier, co-founder and Joint-CEO of Vinomofo, told Business Insider most of the $25 million went to buying out other investors.
“The position guessed at in the Glaucus Research on Vinomofo is inaccurate, outdated and lacks any insight into our then and current strategy, and our current position,” he says.
“Most of the $25 million raise went to buying out earlier-stage investors, rather than capital into the business. Important to know, when looking at cash at hand.
“We brought the company back to a break-even position in Q1 of F18, and are sitting on a similar balance, reinvesting profits into marketing and team growth.”
Eikmeier says the company invested heavily in a brand awareness marketing campaign in 2017, and launched two new markets in New Zealand and Singapore.
“Hence the negative operating cash flow, which was the purpose of that portion of our capital raise with Blue Sky,” he says.
“We’re in a good place, and the future of Vinomofo as a global brand is looking pretty damn exciting.”