COMMENT: Where Is ‘Loud Mouth’ Kogan As Stock Plunges
In case you haven’t notice the loud-mouthed Ruslan Kogan has gone remarkably quiet now that he’s pocketed millions in shareholder money and his business struggles to deliver profits.
This is the same guy who employed PR professionals to sniff out any PR opportunity before the float of the Kogan online business.
He was brash and would say anything to get exposure including a claim that Apple was set to dump JB Hi Fi within three years. The three years came and went, he even welched on a bet with JB Hi Fi CEO Terry Smart.
Now as Kogan.com suspended its final dividend as net profit plunged 87 per cent to just $3.5 million in 2021 Ruslan Kogan is locked up in his multimillion-dollar Melbourne mansion with his flash cars as investors ponder the 13% fall in share value today, with the stock wallowing this morning at $11.28.
Thats a whopping 41% down for the year.
The bad news is that there’s worse to come for Kogan who is struggling to compete online as competitors such as JB Hi Fi, Bunning and Big W struggle to handle the massive spike in online sales that they are currently experiencing due to lockdowns.
This is the same Company that was price gouging consumers during the early days of the COVID pandemic.
The weaker than expected profit included $7.7 million in logistics demurrage charges due to COVID-19-related warehousing and supply chain interruptions, $15.6 million in equity-based compensation expenses to cover the cost of options awarded to co-founders Ruslan Kogan and David Shafer, and $12.8 million in provisions to cover likely final payments for New Zealand-based online retailer Mighty Ape.
Earnings before interest, tax, depreciation and amortisation fell 51.6 per cent to $22.5 million, including $7.1 million in earnings from Mighty Ape.
Adjusted EBITDA, excluding equity-based compensation and one-off costs, rose 40 per cent to $61.8 million, marginally higher than the company’s guidance of $61.1 million, which was tweaked in July after being downgraded in May.
One has to seriously question whether Shafer and Kogan actually give a stuff what happens to the business as they are both wallowing in money.
Unlike JB Hi Fi who cut back orders with suppliers when the COVID pandemic hit Kogan did the opposite expanding their warehouse network from 14 to 31 to accommodate the extra stock and protect the group against supply chain disruptions and rising prices.
The only problem is that the gamble failed to deliver the growth that the directors anticipated, Kogan’s sales growth was simply not there with competitors stripping share resulting in Kogan having to slash prices in a desperate effort to reduce stock levels.
In their latest results the company said gross sales rose 5.1 per cent in July 2021, after soaring more than 110 per cent in July 2020, since then everything has gone pear shaped at the online business.
EBITDA fell to $2.1 million, compared with $10 million in July 2020 as operating costs remained high.
At the end of June Kogan had $12.8 million in net cash. The board decided to withhold the final dividend to conserve cash.
Currently Kogan competitors in the CE and appliance markets are not having to discount to get a sale, with many selling stocks at the full bore recommended retail price. There is problem for them is getting stock new stock.
Back in November 2020 Joe Aston writing in the Financial Review said that the Company would need to raise capital to fund the share options that the business is now provisioning for.
In June 2020 Kogan.com raised $100 million “to provide what they described at the time as the financial flexibility to act quickly on future value accretive opportunities in order to enhance its operating model”.
Aston said it would be entirely self-defeating (and another betrayal of shareholders) to divert that growth capital into a buyback to fund a long-term bonus for its founders that shareholders are opposed to paying.
How delicious it would be for Kogan.com’s institutional investors to be tapped next year to throw money into another raising, this one for the express purpose of funding the massive bonuses of Kogan and Shafer that shareholders have already voted down!
He claimed that the contempt Kogan.com has for its own shareholders is astounding.
And given the board has told its investors their views will be disregarded, why on earth would any of those investors – including the index funds that hold about 10 per cent of the stock – do anything but lodge a protest vote?!
Between managing its endless IT crises, the ASX must surely close the absurd loophole in its listing rules that forbids the issue of new shares to insiders without shareholder approval (10.14) but then allows the board to purchase securities on-market for those insiders even after shareholders have disallowed the issue of new shares (10.16). This is custom built for exploitation by governance cowboys.