Shell Summary for April 1, 2019
THE TSX Venture Exchange slipped a fraction to 626.19 Monday. James McRoberts’s first capital pool shell, Haw Capital Corp. (HAW: suspended), plans to acquire a Montreal food delivery company called Golo Inc. for the shell’s qualifying transaction. The shell, which has 13.54 million shares issued, will issue 113,235,293 shares to its target’s shareholders. Among those shareholders will be the subscribers to a $6.75-million private placement, at 17 cents, which Golo aims to complete. First-time shell-maker Mr.
McRoberts, an e-commerce consultant in Calgary, is not unfamiliar with Montreal’s tech start-up sector. In 2008, he helped Joel Leonoff of Montreal to reacquire Optimal Payments Inc., a payment processing firm that Mr. Leonoff founded in 1997 and then sold in 2003. Mr. Leonoff and Mr. McRoberts each paid for half of the $7-million (U.S.) reacquisition price in 2008. Mr. McRoberts then became Optimal’s chairman and 50-per-cent owner, while Mr. Leonoff managed the company as its president, chief executive officer and remaining 50-per-cent owner. Just three years later, Mr. McRoberts and Mr. Leonoff sold Optimal to a London AIM-listed payment processing firm, Neovia Financial PLC, for a pleasing $50-million (U.S.). Mr. Leonoff joined Neovia, but Mr. McRoberts did not.
In 2016, Mr. McRoberts founded a payment processing firm in Calgary called Merrco Payments Inc. It sold hand-held point-of-sale terminals and offered on-line payment processing services. As of mid-2018, Merrco was not profitable. Nevertheless, it was paying its founder, Mr. McRoberts, a “consulting fee” of $225,000 a year. (It was paying its president and CEO, Fern Glowinsky, a salary of $500,000.) Mr. McRoberts last year arranged to take Merrco public through Haw Capital, but he called off the deal last month. He provided no reason for the cancellation.
Haw Capital’s new QT target, Golo, has a website and an app that exclaim, “Go local!” The website and the app essentially work like Skip the Dishes. They enable users to order food and a few other products on-line from local stores that do not offer delivery services, and then Golo takes care of the delivery. So far, 65 stores in Montreal have agreed to accept orders through Golo and to release the ordered products to Golo’s delivery drivers. Of those 65 stores, 62 are restaurants, two are pharmacies and one is a flower shop. In Toronto, 11 restaurants and one flower shop have agreed to make their products available for delivery through Golo.
Disappointingly for Golo’s potential customers, its website says that if a delivery is late, then the customer’s recourse is to complain to the store, not to Golo. “Please contact the merchant directly,” Golo says, “and they will be able to provide explanations.” In 2018, Golo went lo(w) and lost $10.94-million on revenue of $257,320.
Golo boasts of being a subsidiary of Neovia Financial’s successor, Paysafe Group Ltd. This is a detail worth boasting about, because apparently Mr. Leonoff has done marvellously as the president and CEO of Neovia/Paysafe. In 2016, Paysafe earned $142.02-million (U.S.) on revenue of $1-billion (U.S.). In 2017, it was acquired by Blackstone Group LP (BX: $35.40 (U.S.)) and a British private equity firm called CVC Capital Partners SICAV-FIS SA for 2.96 billion pounds sterling in cash (or 5.90 pounds sterling a share). These days, Mr. Leonoff remains the president and CEO of Paysafe.
Considering Golo’s 2018 financials, its arrangement to go public through Haw Capital seems like Paysafe’s attempt to get rid of the lame horse in its stable.
Mr. McRoberts, who does not typically manage the companies which he helps start, will unsurprisingly resign on closing of his shell’s QT (assuming that the QT does close). The resulting issuer’s board will comprise Jean-Francois Noel, Danny Chazonoff, Brian Kreisman, Brahm Gelfand and Robert McCue. Mr. Noel, an industrial engineer in Montreal, will be the president and CEO of the resulting issuer. The second director nominee, Mr. Chazonoff, lives in Montreal and is the chief operating officer of Paysafe. The next nominee, Mr. Kreisman, is an accountant, and the last two nominees are lawyers.
Haw Capital listed in March, 2017, with a $354,000 initial public offering at 10 cents. It was suspended 10 days ago for failing to close a QT within 24 months of listing. This suspension is of no real consequence. Many shells take longer than 24 months to close a QT. As well, shells with QTs in progress are typically halted anyway.