Guvera India in state of chaos as streaming firm’s last hope haemorrhages cash
Guvera’s much-vaunted Indian operation – regarded as the lifeline of the company – is in complete disarray with the division haemorrhaging cash, unable to pay its bills and struggling to make its ad-funded model work, Mumbrella can reveal.
The catastrophic position of its Indian business was laid bare in documents from a May board meeting leaked to Mumbrella.
The documents reveal an operation in chaos in virtually every area possible, shedding new light on a company that is struggling to survive.
Details of the turmoil emerged just 48 hours after Australian creditors agreed to a Deed of Company Arrangement (DOCA) that has allowed the company to keep trading.
Deloitte – called in as voluntary administrators of Guvera Australia and Guv Services when the company was refused a listing on the Australian Securities Exchange in June – said the DOCA will “provide greater certainty of a return to priority creditors, such as employees, than liquidation of the companies would have done”.
But the state of the Indian business, often portrayed as its standout market and one in which the company has put great faith in, will come as a further shock to shareholders who, so far, have invested almost $200m in Guvera since it was formed in 2008 by Claes Loberg and Darren Herft.
It also emerged that Guvera’s global director of brand strategy, Max Hegerman, is no longer with Guvera after tweeting a reply to the Mumbrella news that the company will keep trading.
The document seen by Mumbrella revealed Guvera India reported a loss of more than $82,000 in April after a paltry income of $11,352 and expenses of $93,472, almost $44,000 of which was spent on advertising and sponsorship and a further $31,350 on salaries.
The income more than halved from the February and March figures of $25,567 and $26,901, respectively, which both fell dramatically from the January income of $78,365.
Yet according to sources, the company is seeking a revenue target of $20m in India – a staggering amount given the lack of revenue.
One source close to the business said the $20m revenue target was increased from $2m just after the IPO prospectus was lodged.
“It was done to make it appear as though India, one of the last remaining Guvera Ltd markets, could sustain the company in terms of revenue and users,” the source said. “It was an unreachable and completely irresponsible amount and reflective of senior leaderships’ complete lack of understanding of the marketplace.”
The document details the slow and non-payment to music labels, suppliers and partners which, Guvera admitted, is “beginning to affect opportunities”. Though one of its partners, Harley Davidson, has been paid, “relationship with partners has strained”, the company said.
A non-payment to Affle, a mobile commerce and marketing firm, was described as “critical”, with the document confirming the Affle board has approved “legal and punitive action”, while a joint-venture with Indian digital entertainment company Hungama Music was put on hold due to non-payment of 2015 rights fees, believed to be $3m.
Sponsorship deals were also under threat, the board meeting update said, including one with the Mumbai Indians, a star-studded cricket team which played in the lucrative 20/20 Indian Premier League (IPL).
Guvera became the “official music streaming partner” of the Mumbai Indians in March, which saw the creation of a Mumbai Indians branded channel, but the brokers of the deal, Reliance IMG, did not get paid its bill of $300,000.
Another deal, with technology firm Ad:tech, also disintegrated amid Guvera’s financial chaos with the music streaming firm axed from its involvement at September’s iMedia Summit in Kovalam because of its non-payment of bills.
Furthermore, the document also spells out that “few commercial deals [are] closing/renewing”, with the commercial team “struggling with ad-funded model”.
A complete lack of marketing budgets also hampered Guvera’s “commercial/sales and visibility opportunities”, and crippled its ability to drive up the numbers of users.
According to the update, the total number of users in India in April was 6.88m – more than 9m below the 16m targeted by the company.
Guvera launched into India in late 2014, which at the time became its 13th market. Following its failed IPO in June, Guvera operates now in just four – India, Indonesia, Saudi Arabia and United Arab Emirates. It withdrew from Australia this week, vowing to “focus all efforts in key emerging countries, such as India and Indonesia”.
“After several changes in the product and a strategic re-evaluation of the business, we have decided that in order to achieve sustainable and long-term goals we will focus all efforts in key emerging countries, such as India and Indonesia,” the company said. “Research shows that in these countries, consumers simply can’t and won’t pay for the streaming of music and we feel we can return the greatest value to shareholders.”
Comment is being sought from Guvera.
Well done Steve once again …Keep the pressure up on these guys they have fleeced nearly 200mill from Clients via their greedy accountants and now they are seeking more funds for a lost Cause. One must ask the question why is there so many disgruntled people that are associated or have worked with this mob I can understand the Creditors, Shareholders and unpaid staff being disgruntled but look at the leaks coming out from inside. First there was legal action with Michael De Vere , than there has been more changes in management than I have had hot breakfasts and it appears all are trying to tell us the Public what a sham this company is and the fact they have been not releasing the true position , its not what they are saying its what they are not saying, I am a shareholder and refused to contribute more cash based on their recent Fund raising document which had none of the above information, surely now ASIC should step in and take action to stop what’s going on here .
I still cant believe on one hand the ATO only gets between 6c and 25c in the $ and then on the other hand Guvera receives a refund for R & D of 6 mill..how can that work?…I know for a fact people who contributed more funds recently would have not been aware of what you have just raised…isn’t that False and misleading by not disclosing to them ? Steve keep up the good work these guys being Herft Janz and Loberg need now to be held personable accountable
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The Director was for Commercial Strategy in Australia should be looking at themselves very carefully. What a failure of magnitude scale.
I assume they are now working for another business after stuffing up the commercial strategy. Good luck to that business….
Sad, good people have lost their jobs as a result. Good strategy should work and should be executed by qualified professionals.
Good luck guys
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Oh FFS, just let it die already. It’s just a terrible idea.
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Nothing would surprise me now from these peanuts
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I think we are not asking the real question here, how come our trusted accountants recommended this garbage, some of them should be held accountable.
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@martin, yes they should be , the shareholders should be looking closely at making claims against them ( they the accountants should all have Professional insurance) , especially if there was non disclosure of inducements paid to them to encourage them to enter, also if the sophisticated investor did not apply. The accountants had bonus shares issued to them for referring volume of clients , I would be contacting a lawyer to write a letter . Thee spotlight should be now turned on them .
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Some of them?
All of them,
180 million, that’s a lot of coin,
Guvera has been going for eight years and still has s revenue problem?
Oh no we couldn’t make it a subscription based service, that would have been like the others,
But at least it would have given some revenue, duh,
Bloody peanuts!
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John – you should put together a class action against Amma Equity, Herft, Nematela and Janz personally with other shareholders.
Also, complain to ASIC: http://www.asic.gov.au/complain
Good luck mate.
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Complain to ASIC http://www.asic.gov.au/complain
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What I found astounding is that they have never disclosed these Active User Numbers. So 6 million registered users, with 89k Active Users? They have completely mislead everyone. They never diclosed these numbers. This basically criminal. Everyone knows that active user numbers is where the value is and basically they have around 200-300k active users max? And I can guarantee you this number will be less if active users who have used the product over 5 months or more are analysed. So if 300k and you give a value of 10USD per user that is a 3 million valuation. And I am being generous. Where does the 1.3 BILLION valuation come from??? And accountants were spruiking this horseshit??
What a joke.
So if there is not a significant investigation into this … Then I do not know.
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@JB Thx I have already made my feelings known to ASIC and others , I just hope other shareholders follow suit, next step is via my lawyer to my Accountant .
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How can Claes refute any of this? It was mentioned in the article that these facts (and questions/issues) came from a “board report”, which would mean it is an official Guvera document, and something the Guvera Board of Directors should have seen – especially if India was such an important market for Guvera. Hey… isnt Claes on Guvera’s board? And, yet, he claims he never saw the “board report”? And, now he is CEO? Nothing about Guvera shocks me anymore…
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Tongue in Cheek Here what the updated Board Minutes of Guvera;s last meeting should say
Chairman : Ok we started with USA , Australia , Mexico , Russia, UK and we have been found out that we haven’t got the active users and we have stuffed those up lets Close them down all in favour say Aye
Response : Aye
Chairman : Ok lets now change the model from music streaming to add funded and branding all I favour say Aye
Response : Aye
Chairman : Ok we didn’t get the money we thought we would get so we are now Broke , but maybe we can keep this afloat by closing all these Offices changing the model and saying India and Indonesia and UAE are our saviours because these people will not pay for content all in favour say Aye
Response From one : But sir we don’t have many active users in these countries and we owe heaps of money and have potential legal action and the media now know as one of your managers leaked the board memo.
Chairman : OOPs that’s not good Ok lets drop India and stick with Indonesia and UAE surely they wont get the detail’s on these all in favour say Aye
Response: but sir I think we are in the exact same S$#t in these countries
Chairman : But have the media found out yet ?
Response ; No but its only a matter of time
Chairman : Good lets stick with this model all in favour say Aye
Response : Aye
Chairman : ok Bar is open my shout
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They never disclosed users because they never had them. I believe this was the game they were playing from the very beginning, and maybe they would be quite happy now if: Guvera dead, Money settled, Noise down.
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Maybe now that Max Hegerman is no longer working for guvera maybe he can explain who twisted his arm to make these comments only a few months ago, and would now spill the beans on reality so as to protect the Investors
http://www.klas.com.au/guveras.....tnerships/
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What an absolute bunch of con men.
This all goes back to AMMA equity.
Herft is responsible for this mess. His ego and drive for lining his own pockets amazes me.
The interview on the ABC saw a man avoiding the truth. Watch it, a joke. I am an investor and I am going to take legal action agaist AMMA . A forensic accountant won’t have trouble tracing what has happened. Jail time on the cards for the guys at the top.
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Brilliant
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@ Taking The Pis: Magical. A true peek behind the curtain…
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@ Peter, He is now working over at 7West as their Digital Solutions Manager after leaving Guvera 2 months ago.
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