As Ruslan Kogan sells down shares in his Company which has a significant cash flow problem, Credit Suisse executives are advising clients to also sell down their shareholding.
Credit Suisse’s hedge fund sales trader Sujit Dey told clients on that while revenue had grown in the trading update, cash flow in the quarter was negative to the tune of a nearly a million dollars.
“When cash flow diverts materially from EBITDA, it is a big warning sign for any retailer,” he wrote, showing a certain suspicion of Kogan’s explanation, which is that it’s investing in stock for the Christmas sales (particularly as it managed $4 million in positive cash flow this time last year).
He said “It seems to me that the founders are selling out in advance of Amazon’s entry and if I were an investor in Kogan, I would too … Again, no one knows more about this business than the founders so when they sell like this, the market should take careful note of it.”
When Kogan moved to float it was ChannelNews who tipped that the founders would bail shares as soon as they possibly could.
On Monday Kogan.com unveiled a major lift in earnings and revenue but investors are not buying the spin.
The stock is down almost 12 per cent so far, this week, probably because Kogan and his CFO David Shafer sold out stock.
Kogan and Shafer each made $7.5 million out of the IPO, and more in August, when they sold out of $14.6 and $7.9 million worth of stock respectively.
This week, Kogan sold 3 million shares for $12.8 million, while Shafer made almost $10 million for his 2.35 million shares.
The AFR Said that Kogan and Shafer together still own 56 per cent of the manufacturer and retailer, and its understood the sales came after an approach from an overseas institution keen on increasing its exposure to the company (which is hardly liquid).
