Splash The Cash Kogan Under Investigation After Pocketing Millions From Questionable Options Deal

Ruslan Kogan the bragging CEO of struggling online web site, Kogan.com, and his long-time finance director David Shafer are being probed by the ASX over, controversial share options deal awarded to the pair in 2020 which saw them net $18 million.Kogan who loves splashing the cash on fast cars and houses for both himself and his mother, has seen his business questioned by regulators, who are looking for justification for the payment of tens of millions of dollars in cash to the CEO and his finance boss David Shafer, that was made weeks out from a major downgrade in the business that saw shares tank and investors lose millions.

The cash-for-options deal infuriated investors as the deal to buy the options – which were originally issued in 2020, and worth $53M at the time was made only 20 days before a poor trading update from Kogan.com saw its shares collapse by almost 30 per cent.

Ruslan Kogan Centre, David Shaffer right

At the time the business was over stocked, facing high warehouse costs while also struggling to shift stock despite heavy discounting.

The ASX now want an explanation relating to the metrics around the worsening performance of the business.

In response, Kogan.com said it paid Mr Kogan $5.6m in cash and Mr Shafer $3.7m. It said the two most powerful executives in the company were not in possession of any material information that was not generally available at the time they accepted the cash for their options.A lengthy series of letters between the ASX and Kogan.com have been revealed to the media.

Kogan.com has also been forced to publish email exchanges to Mr Kogan and Mr Shafer over the purchase of their lucrative options that were valued at almost $18m.

The cash-for-options deal infuriated many investors in Kogan.com as the deal to buy the options – which were originally issued in 2020, worth at the time $53m and highly controversial – was made only 20 days before a poor trading update from Kogan.com saw its shares collapse by almost 30 per cent.

Kogan.com said it would allow the two executives to sell the options back to the company for the difference between their strike price – $5.29 – and a proxy share price of $8.22 that took account of the volume-weighted average trade over 20 days.

The stock soared to $7.90 at the time of the April 4 options sale after Kogan.com told investors profit margins and earnings were strong.

Following the poor update later that month, Kogan and Shafer sold their options, the shares fell 27.5 per cent to $5.10.

There has also been growing anger over the nature and detail of that trading update, in terms of the various financial metrics disclosed, and now the questionable deal is being trawled over by the ASX.

The shares today are trading at $4.71 having fallen 10% year to date.

During COVID Shares in Kogan.com later rocketed to almost $25, making those options worth almost $100m.

Recently Kogan sold 3.6 million options for $10.6m, while Mr Shafer sold 2.4 million for $7m.

At the time Kogan.com cited the online retailer’s “strong balance sheet” when handing the cash to the executives, but three weeks later a trading downgrade revealed a worsening performance which insiders claim the business knew about.

The ASX in its ‘please explain’ letter to Kogan.com has asked how the price at which the board settled the options was reached.

It also wanted to know when the company became aware of its trading performance, if the sale of the options met with its own trading policy and to confirm that Kogan.com was complying with relevant listing rules around director trading and updating the market on financial performance.Kogan.com responded claiming that the business paid the CEO $5.6m in cash and Mr Shafer $3.7m. It said the two most powerful executives in the company were not in possession of any material information that was not generally available at the time they accepted the cash for their options.

Multi million dollar Toorak Mansions purchased by Ruslan Kogan

What’s not been explained is the sudden deterioration in the business performance over such a short period of time.

What they did claim is that their financial metrics were consistent with prior quarters with gross profit remaining positive on prior quarters.

The Australian reported that a separate ‘please explain’ communication from the ASX questioned Kogan.com about the nature of its trading update this month, the financial metrics provided and the seeming departure from consensus forecasts.

In response, Kogan.com argued the analyst views – which perceived a decline in Kogan’s loyalty subscriptions program and Kogan Marketplace sales – ignored important context concerning seasonality trends.

It also argued that mentioned analysts cited by the ASX in its letter also referred to gross sales of Kogan Marketplace and its New Zealand business Mighty Ape, but that these business divisions comprised two of 12 divisions mentioned in the trading update.