Sugru screwed Crowdcube investors for around £6m. It now seems confirmed that the breach that occurred in their banking facility with Clydesdale Bank, prior to the 2017 pitch, was material and was hidden from investors.
It all depends on interpretation. Sugru claim it was not material but they admit it happened and they admit they and Crowdcube agreed not to tell investors. Thereby materially altering the company position presented by the platform - which claimed the £3.5m facility was 'secure'. The accounts for the period confrim that the breach resulted in the loan, due to be repaid in 2019 was moved into current liabilities. That is material.
This is Paraic's (a board dierctor at Sugru) extraordinary explanation of these events -
As for the “discrepancy” you mention, there is none. In the crowd cube pitch the bank loan (£2M) and loan from junior debt holders (£0.5M) were both classified as long-term debt. In the Dec 2016 statutory accounts these two amounts were classified as current liabilities. Hence, the net current liability position in the statutory account looks worse than the net current asset position in the CrowdCube pitch. It is purely a classification change. Again, no “smoking gun”.
Paraic if you read the accounts, the reason given for moving the debt from LT to ST liabilites is the breach of the covenant. They were moved not 'classified'. This movement put your company into a net deficit on its current account. Most of us consider that to be a highly important fact that should have been shared with investors in the 2017 Crowdcube raise. You clearly dont but you give no reasons for this curious decision. Perhaps accounts are not your thing. This is not just a smoking gun - it's a bleeding, recently dead body with a large bullet hole, also.
Sugru go on to say that the Bank's withholding of the balance of the loan was not the reason the company had to be sold. They later go on to say that cash issues played a significant part in the course of events. They clearly cant add 1 and 2 up and get to 3. As we have said before the collapse was down to very very poor management. Full stop.
Which ever clever way you try to spin this - it all reeks of collusion and fixing. How Crowdcube will get away this, as they undoubtedly will, will be interesting.
We have been approached by a source who has another take on this and it is one that the platform will not be able to get away with if it turns out to be true. It is certainly material and it was never mentioned either.
Watch this space!