Tuesday, March 27, 2018

Guvera CFO was concerned when he joined the business, but trusted its CEO to raise more finance | UNLIMITED | CMU


The public investigation into the collapse of one-time streaming service Guvera continued in the Australian courts last week. This time it was the company’s former Chief Financial Officer Ken Hostland discussing the events that led up to the digital music company’s ill-fated IPO in 2016.

The Australian Securities Exchange ultimately blocked Guvera’s Initial Public Offering, which began a sequence of events that led to the collapse of the digital music firm. Accountancy giant Deloitte, as liquidator of the business, instigated the court-based public examination as it tries to work out what events and decisions led to the company’s demise, which in turn left shareholders $180 million out of pocket.

Hostland became Guvera’s CFO in January 2016 and – according to Mumbrella – he admitted during last week’s hearing that he had immediate concerns about the company’s financial position. However, he said, his role didn’t include direct oversight of the firm’s fundraising efforts, and he put his faith in Guvera CEO Darren Herft’s ability to find further finance, primarily through his separate private equity business Amma.

Various partners beyond Amma had been seeking significant investment for Guvera in 2015, though those efforts didn’t deliver. In an earlier hearing, Herft himself admitted that was why the company proceeded with its IPO in 2016, despite advice from JP Morgan that it was too soon, because it needed the cash it was hoped the flotation would raise quickly.

Asked about his concerns after taking on the CFO role at Guvera, Hostland said last week: “The directors who had worked at the company for a long period of time were confident that the ability to continue to raise capital was something Amma was capable of doing”. Nevertheless, not long in the job, Hostland was asked to significantly cut the company’s operating costs, including cutting the number of countries where it operated.

Hostland was also asked about whether he initially expected the doomed IPO to be a success that could provide Guvera with the cash injection it so urgently needed. He insisted that the company’s ‘due diligence committee’ would not have signed off the flotation’s prospectus had it not expected the listing to succeed.

According to Mumbrella, he said: “I believe the due diligence committee proceeded forward because we felt it was still very possible to be successful and raise the funds that were required. I believed it was going to be successful on the basis I was comfortable with the process that we had gone through, the due diligence we had gone through, and the expectation that the capital raising was going to be successful enough to raise those funds”.

More questions will be asked about the Guvera collapse when the public hearing reconvenes on 6 Apr.

[from https://ift.tt/2lvivLP]

No comments: