[Logan]

Thank God the board is still alive and somewhat active. We need them to be more proactive and try to fix all the issues at the earliest.

The new board member has a good profile. I was expecting them to appoint an executive director but they’ve appointed an independent director. Looking at his profile, I think he will guide them on regulatory matters and also help them to hire the next CEO and CFO (and an executive director). This is just a wild guess/speculation and I maybe am wrong on this.

I think the company secretary might have quit (or he’s on leave). The last few notifications from the company have been signed by board members instead of the CS. The last signature from the CS was when the company shared the outcome of board meeting held on 27th August (when the CEO and CFO resigned). Obviously no one will want to associate themselves with a tainted company but leaders are made in crisis times.

I’m glad that the new board member has accepted the role of independent director during crisis times and I wish he will help the company and the shareholders which is the need of the hour. I wish him all the best and hope that his appointment will bring a fresh change and that good things will follow and we see good times ahead.

[Logan]

I had respect for SKR for building BCG from scratch and I always thought that he had good intentions but because he was not good in market related things he was not taking good decisions on valuation part and I thought the company could hire someone to guide on that front and fix the all issues. He was answering each and every person’s queries in the conference calls, he closed all the debt, made sure the company survived when other companies failed. Even recently I was little scared and worried when Mediamath had failed. That company was good operationally but took on more debt because of which it was sold for peanuts recently. I liked that he didn’t take on debt. This is a very tough industry to be in and I thought he was doing the best he can but all these didn’t give him the right to do the thing which he did. Company not getting a single rupee for the crores of shares it gave away and him doing forgery, those are the worst things someone can do.

Compared to the past, there was an improvement in governance (especially when Mr Peshwa Acharya came on board) but not to the extent we had hoped. After FA verdict came, I thought the company had no choice but to fix the governance part and comply with all the rules and regulations. If the company failed then SEBI will put pressure and make sure that everything will be followed. Best example was sharing the audited results of major subsidiaries.

In hindsight everything looks clear but when we are in a particular situation it’s very hard to be rational.

Warren Buffett said this when asked what he looks for in managers (or people who he likes to hire)

Look for 3 things in a person. Intelligence, Energy, & Integrity.
If they don’t have the last one, don’t even bother with the first two.

Being a naive idiot that I am, I didn’t look at the third one i.e. I concentrated on the first two. I thought that there are flaws in the company/management and that could be fixed. Even Mr.Shankar Sharma had mentioned the same when he talked about his investment in BCG and termed it as a 4AM stock.

Everything would’ve worked if he didn’t do that fraud. The worst part (which I said in my previous post) is that those PW allottees didn’t even pay a single rupee yet they made hundreds of crores. They started dumping as soon as their lock in period ended but we retail investors kept on buying.

He said in one of the conference calls that he had put his heart and soul into the company but would anyone with a heart and soul cheat shareholders and the market like this? The person who was supposed to guide the company and lakhs of shareholders has backstabbed us. I’m not sure how he can eat food and sleep at night with all the guilt.

Also, I wanted to highlight on adauth data. I’m not sure how it works and how important it is when it comes to revenue and profits. The market share is not on an absolute basis, that is, currently it shows BCG having 14% market share, Google having 86%, PubMatic 43% etc etc. It doesn’t mean that BCG has 14% and rest are others but it means that out of the 100 publishers 14 use Brightcom and 86 use Google, 43 use PubMatic etc and that one publisher can use two or more adtech companies. For example, CNN can have BCG, PubMatic, Google and other companies. People will hype this data but be careful on that. And the important part is that adauth shows mostly SSP data (supply side platform) but not DSP data (demand side platform). TTD’s revenue is more than $1.5B but its market share in adauth is less than 1%. TTD is mostly a DSP.

(I think BCG also owns Audienciad, GetMediaMX, Onomagic etc so everything is not entirely clear)

And other thing is about PE ratios of many adtech companies. TTD is not trading at 336PE. In the US they consider both GAAP and non GAAP earnings. So when you consider one you get $400-500M profit and when you consider the other you get $120M profit. Same for Magnite, PubMatic etc.

If SKR was honest and didn’t backstab shareholders then he could’ve achieved so much but he shot himself in the foot and because of his stupid actions and betrayal, we have to suffer. I hope and pray that the board will take swift actions and genuinely care about retail shareholders who have supported the company through thick and thin. Hope that the next chairman/CEO will have more integrity and he/she will get us out of the mess created by SKR.

I wish everyone a very happy Ganesha Chaturthi. Hope from this day we will start to see good days.

[Logan]

Founders of companies or CEOs deserve to be rewarded for the work they do in building and growing the company but that should be done in an ethical and legal way. Like mentioned before, TTD (and many other companies) will give billions of dollars worth shares to its CEO if he performs well and BCG could’ve followed the same and no shareholder would’ve complained. What SKR did was backstabbed lakhs of shareholders who believed in him and the company for years.

In many confrence calls he called shareholders as family and even when the company issued that stupid second bonus shares he called shareholders as family. Would someone do something like this to family members?

He knew that most of the shareholders of his company were retail investors (mostly from hardworking middle class families who put their hard earned money and life savings) and yet he backstabbed everyone.

The worst part is that his rich friends who were already rich made hundreds of crores of money and became ultra rich without paying a single rupee while hard working people who put their hard earned money and life savings (like mentioned above) became poorer every day. I don’t know he slept every night without feeling any guilt. People who have humanity/empathy towards other humans won’t do this type of things.

I had mentioned in many of my previous posts that SKR was good when it comes to business side of things and bad when it comes to valuation (like giving shares to selfish people, then giving unnecessary second bonus shares, not having good corporate governance etc). I always thought that if the business was good then valuation will catch up eventually but I never thought he’d resort to this. One good thing that he did was he made the company debt free.

In all my years as a shareholder of BCG, I never experienced a good time. There was always drama and anxiety. I never imagined that a CEO of a major company would do such a thing. I don’t understand how a person can be that stupid and show fake transactions in this digital world. With the recent episode, drama has turned into a horror show.

Like in horror movies, the devil or the ghost has come and now there’s no choice but to face the ghost and get rid of it. As retail investors we don’t have options but to rely on others. It’s the responsibility of the board but will they do it? Maybe they’d have done it quickly if big institutional shareholders were there but will they care about retail investors? Who can we trust and rely on now?

Like I’ve mentioned before, we should put maximum pressure on the board now to make them do things quickly. They owe shareholders a lot and they should take the responsibility at least now. Lakhs of shareholders depend on them now and will be happy if they take good decisions.

We need a strong chairman and a CEO who will be ready to clean up all the mess created by the previous management. We need a CEO and board who will genuinely care for shareholders and who will have empathy towards lakhs of retail investors.

[Logan]

In this difficult situation I can understand every investors’ frustrations and pain. It’s very painful to look at stock prices declining each and every day and the company not taking quick actions to fix issues. Like I said in my previous post, if they have even a shred of humanity/empathy/sympathy then they will take quick and necessary actions.

The previous CEO betrayed each and every shareholder by his selfish acts. He brought pain and misery to lakhs of investors and their family. No one knows what’ll happen in the future and how long it will take for things to get better. If he really wanted only money then he could’ve sold the subsidiaries and distributed that money well before doing these shenanigans.

Why make investors and employees go through so much pain? He should’ve known that any day he would get caught and should’ve resigned when SEBI started investigation on preferential allotments. When I saw the news and the second interim order, I was in shock and horror. What did he get at the end? Even his friends and family will not give respect to him for the rest of his life. He did such a shameless thing and he should be punished for the sins he committed.

Like Warren Buffett says, it takes 20 years to build a reputation and 5 minutes to lose it. In BCG’s case same thing happened. Everything could’ve been done in a honest and correct way. Why did he take the bad path when the good path was so easy to take. Many companies are professionally run and they have miniscule promoter holdings (especially in the foreign countries). If he conducted everything in a honest way and didn’t do such shenanigans then the market would’ve given a good valuation to the company even if the promoter holding was low. This would’ve been way better for him than the current situation that he is in. Now he’s also not in a good situation and like mentioned above, his actions have made investors also to be in a bad situation.

Like they say, pray for the best and prepare for the worst, I’m following the same.

The best scenario would be all the revenues and profits are 100% and the new management and board cleaning up the mess created by the previous CEO and bringing more transparency and good image.

The 50-50 scenario would be at least 40-50% of the business is real (audited by EY) and the company takes good care of that subsidiary at least.

The worst scenario would be nothing gets done and the stock gets delisted.

I’m hoping and praying that everything will be good and shareholders will get rewarded. We should continue to stay united and continue putting maximum pressure on the company to get things done quickly.

[Logan]

The board/management/transition team should wake up at the earliest and should look at shareholders concerns seriously. Just saying words isn’t enough and they should start taking actions.

If they have any humanity/empathy/sympathy towards shareholders then they should start taking actions quickly.

I think we have to start putting maximum pressure on them now. It’s two weeks since the order came and there’s no action from the company.

I request each and every investor to send multiple emails or call the company’s number everyday or visit the office and put maximum pressure. We have suffered enough and we can’t continue this way. Everyday our health and hard earned money are getting affected because of the selfish and stupid acts of the CEO and others.

Many PW allottees didn’t even pay a single rupee but they have made hundreds of crores of rupees at the expense of small retail investors who have put their hard earned money and life savings.

We may have different opinions on different topics but at the end each of our goal is the same. Let us stay united and contribute in our own way i.e. all of us can’t visit the company’s office in Hyderabad so we can contribute by sending mails or calling them multiple times.

The need of the hour is that the company showing empathy towards shareholders and taking the responsibilities that they should’ve taken all these years. All the shareholders have supported the company through thick and thin and it’s time for the company to do the same for shareholders.

[Logan]

It’s good that the company and board shared something at least with shareholders. Everyone was (and still is) anxious and nervous because of the stupid actions of the previous CEO. I don’t understand what these people who do such fraud activities get. Because of them, lakhs of shareholders and hundreds/thousands of employees will suffer.

Like I’ve said many times before, BCG is run like a private company and all the decisions and responsibilities were in CEO’s control. In last conference call I had asked the CEO why BCG doesn’t follow the model which most tech companies follow i.e. having a COO (chief operating officer), a CTO (chief technology officer) or other important positions. I/we didn’t get a response for this.

It’s good that the board has finally acknowledged the cons of it. Relying on one person (or two including the previous CFO) will not be good for any company. Also, just acknowledging it isn’t enough but they have to act on it.

If the board acts on what they say (on appointing top auditors) then it’ll be a big relief for shareholders. Let the new auditors check everything thoroughly and bring more transparency which is needed very badly.

The need of the hour is the board taking decisions quickly and not wait till the very end to act.

[Logan]

@vkhare789, did you visit SEBI office? Did you share our concerns with them and what did they say?

Thanks in advance.

[Logan]

Twists and turns in the Brightcom case

SEBI has ticked off Brightcom auditors. This may lead auditors to be more upfront about irregularities in companies’ books

I still can’t figure out why the previous CEO did such a stupid thing and the auditors rubber stamped it and brought trouble to us. Like mentioned before, everything could’ve been done in a legal and honest way but he chose the wrong and illegal path.

I hope and pray that the central government and SEBI will intervene here and protect lakhs of retail investors as mentioned in the article.

There is a good possibility that the Central Government would step in and do to Brightcom what they did with Satyam — take control of the company and hand it over to someone who can possibly manage it better.

[Logan]

@odysee, I think it’s a typo and they must’ve forgotten to add zero (0) at the end. The actual revenue in 2018-19 was 2,580 crores.

[Logan]

@vkhare789 and @saach, we can form an association legally with Sebi’s blessings and approval but my concern is who will take the responsibility. I’ll always support if someone takes up this initial and will sign whenever you require my signature but somebody should take the responsibility. Because of my health issues I’m not in a position to take such a big responsibility.

In the past, investors of Lakshmi Vilas Bank had formed an association but they couldn’t do much as the bank had very high levels of debt and was sold to DBS Bank later and investors didn’t get anything.

Satyam’s case worked because there were FIIs and FPIs but I’m not sure who will take the responsibility here as the majority is held up retail investors. Most of the companies in similar situation will fail or have failed because of high levels of debt but thankfully BCG is a debt free company.

The board and management team of foreign subsidiaries of BCG still have time and they can make sure that we can navigate through this crisis. Though there’ll be short (and long term) pain, if they take good decisions then BCG can recover from this.

We should send request mails to sebi individually or as an association and make sure that sebi doesn’t take drastic actions which will impact the shareholders of the company. Let them ban the culprits but they should not ban the company from accessing capital markets. Lakhs of shareholders and hundreds of employees should not suffer because of the misdeeds of the CEO and others.

Like I’ve mentioned in one my previous posts, there’ll be many scenarios, and in my opinion, the best scenarios would be

1) The current board taking correct decisions and appointing a good chairman/CEO and cleaning up all the mess. Make sure there’s continuity in the operations and business.

2) A new strategic investor (like institutions, mutual funds, PE or VC funds etc) buying substantial stake, taking control of the operations and board, making sure that they appoint an able chairman/CEO, clean up all the mess.

3) Sebi/Government interfering and appointing board members and make sure retail investors’ don’t suffer. Sebi not banning the company from accessing capital markets.

The first is easy to do as it depends on the current board and management as there’ll be continuity but the second and third are relatively hard because we have to rely on others.

In the Q4 conference call, I had asked the old CEO about Sebi potentially banning him and the company from accessing capital markets and to that he said that they have plans if such a scenario happens and nothing should impact the business and operations. I don’t know how much we can trust him and his words after recent events but because the company is debt free and the subsidiaries are independent, there are chances that the operations will not be impacted. But we can never say this for sure.

(These are just my guesses and opinions and everything may change in reality so please don’t take my posts for buy/sell decisions and if you have any doubts then approach SEBI)

[Logan]

@nitin_asce, like you, it’s a puzzle even for me and all the investors. Even Mr. Shankar Sharma has said the same. Every investor is in shock and horror.

No shareholder would’ve objected if he took crores of salary or if he subscribed to stock options but he took the wrong path. The Trade Desk will pay billions in stock options to its CEO if he performs as per the board’s expectations and BCG could’ve followed the same. He’ll be remembered as a culprit in history and it’s an embarrassment for his family also. In a legal and honest way he could’ve achieved a lot without taking the wrong path.

On next CEO/chairman, even if SKR has influence, the new CEO cannot miss mandatory regulatory compliances and rules. If the new CEO becomes a rubber stamp then he/she will end up like the old CFO and they’ll be removed again by sebi. From now onwards, how much ever the pain will be, they must and should follow all the rules and regulations.

On the third part, I’m not sure what actions sebi will take. It’s better to wait for sebi’s actions. I don’t think he’ll have access to capital markets for many years to come.

[Logan]

News analysis. Brightcom: Satyam-like rescue operation needed to protect interests of retail investors, employees

[Logan]

I never in my wildest dreams would’ve imagined that the CEO would do something like this. All the shareholders had trusted him and the management for years but we feel betrayed by their actions. His case is like someone shooting themselves in the foot for stupid reasons. He could’ve achieved so much honestly and legally but he chose the wrong path. It’s good that both the CEO and CFO resigned. If they didn’t resign then a different type of drama would’ve started.

The board should start cleaning up the mess and should start looking at the interests of 5 lakh shareholders who have supported the company through thick and thin and who have put their hard earned money (many have invested their life savings).

There’s nothing to lose for the board and everything to gain. If they fulfill their commitments and roles then they’ll be the saviours of retail investors. Hope they appoint new CEO and CFO at the earliest and follow all the regulatory guidelines.

[Logan]

@akkithegrt, I’m not sure on that but Jacob Nizri sits on the board of OMS (Brightcom) as per details on their website. He is mentioned as the president and other members of 44 Ventures are the remaining members of the board.

Also, in the Brightcom ownership document that’s available on BCG’s website, it is mentioned that Jacob Nizri, Suresh Reddy and Vijay Kancharla (all the 3 names are written like how you would pronounce their names in Hebrew) as the company’s directors and that Kost Forrer Gabbay and Kasierer as CPA (Certified Public Accountant)

In my opinion, Jacob Nizri would be the ideal candidate as CEO but not sure whether he will consider it as he will be tasked with cleaning up all the mess created by the current CEO. Maybe an interim CEO would be a better option to clean up the mess and they can appoint an ideal candidate once everything is fixed.

@radhutheoptimist, I’m not sure on that as I’m seeing this type of issue for the first time. I could’ve commented if something similar had happened with other companies. It’s best if you can check that with sebi.

[Logan]

@saach, There are many possibilities and among them I can talk about few which are mentioned below. In every scenario how much ever good that maybe there’s short and long term pain and nothing would be ideal.

1) Him resigning immediately and appointing a strong chairman and a separate CEO and a good CFO who’s not a rubber stamp. Chairman to clean up the mess, CEO to look after the business and CFO to make sure that there’s no gap in financials. My suggestion for CEO would be Jacob Nizri or Etai Eitany or Bradley Cohen and Peshwa Acharya as the chairman. This will show that the people who work at the subsidiaries will look after the parent company also. This is a tough industry to be in and we need like minded people to be in CEO and chairman positions.

2) Retail investors forming an association and appointing a CEO and decide who sits on the board. This is a very difficult task and involves many things to be done perfectly. Not sure who will take the responsibility.

3) Someone big may pick up substantial stake and appoint a board and they take care of the company and its subsidiaries.

4) Nothing happens and the stock gets delisted after few years. Don’t know what happens to subsidiaries in this case.

If he really cares about retail investors who have trusted him all these years then he would make sure that the board appoints a person who has the capacity to clean up the mess that he has created.

The main reason I stayed invested and kept on investing at my personal capacity is because of 2 reasons. One is because of OMS (Israel subsidiary) and the other is because of the trust on the CEO. But my respect for him and the trust I had on him started reducing after forensic audit notice and I lost almost all the trust when he and other promoters lied about their shareholding. Israel is a technology hub and is the next Silicon Valley. The future is in technology and technological transformations and Israel will be at the forefront along with Silicon Valley.

The CEO wasted a very good opportunity. He could’ve driven the company without committing these frauds.

Like I said in my previous post that the current situation is like what happened with Securekloud and today similar thing happened. In that company too, ED raided the CEO’s house and he was arrested later. I thought ED or authorities would take actions once the company submits its response and then SAT would give orders but it’s good that they took action now itself.

That company’s CEO was removed and someone else was appointed as the CEO. Securekloud’s subsidiaries are doing okay and business is running as usual. Its subsidiary (Healthcare Triangle Inc) is listed in the US markets. I don’t know much about its business as I checked only the events related to forensic audit and subsequent events.

[Logan]

We should not be in denial and we should face reality. This is a very serious issue. I can see that it is similar to Securekloud. There too the subsidiaries were good but the culprits were the CEO and promoters. But the proportion here is larger.

This is an embarrassment for shareholders, employees etc. The CEO and management should be honest and come out clean and face consequences for their cheap actions. The new CEO when appointed should clean the books and make sure that shareholders don’t suffer much. I don’t know how much time it’ll take but it’s better to get it done at the earliest. If this is done there’ll be short term pain.

[Logan]

Everything was good until they issued shares and warrants on preferential basis. Even in the forensic audit conducted by sebi there was no fake revenue and profits but the issue was the way how the impairment was reported. But this time it is serious as it shows serious fraud. I never expected the CEO to do this and I’m in real shock.

Giving clarification will not make this go away. It may soothe some nerves but there’s a big task ahead. The CEO should take moral responsibility and immediately step away from the company. The person who will be appointed next should clean the company and make sure that all the rules and regulations are followed 100%. Maybe sebi should appoint a person on board and that person should make sure that all the issues are fixed.

Everytime the CEO screws up things and shareholders have to suffer later. The warrant allottees made hundreds of crores at the expense of retail investors.

[Logan]

We should form an association (with SEBI’s blessings and approval) and make sure that shareholders are not impacted because of the cheap actions of the CEO and promoters.

Mr.Peshwa Acharya or Mr.Satish Cheeti should be appointed as the interim CEO and navigate through this crisis.

[Logan]

This is a serious matter and a shame that the CEO and others have put shareholders in such a situation. Now we have to suffer because of their actions. I had respect for him because of business skills but now there’s zero respect. I never expected that he’d cheat investors like this.

It’s high time that the company should appoint a new CEO and chairman who will save all the investors.

[Logan]

To the CFO, Mr.Narayan Raju

-Is the audio ad business profitable? How much are the profits out of 60 crores revenue?

-When will you upload the audited results of other subsidiaries like Dream Ad Group, Max Interactive, Get Media etc and also the audited results of subsidiaries for FY2022-23?

-The auditor has commented that the Company is not regular in depositing undisputed statutory dues including TDS and Income Tax as applicable to it with the appropriate authorities. Can you please explain on this? The total amount is little over Rs.200 crores which is not a small amount.

To the CEO, Mr.Suresh Reddy and Mr.Peshwa Acharya

-When will you take the company’s valuation seriously? We feel that there’s no interest from you to improve the company’s perception and image in the market. The company’s valuation fell more than 90% and we feel that you aren’t concerned about that.

-Have you analyzed why BCG’s share price fell more than 90%? This is not the first time in BCG’s history where we have witnessed such an event. What remedial measures are you taking so that such cases don’t repeat again? There are many other companies with bigger problems which have share prices stable but in BCG, the stock price always react extremely. The business is stable and it’s better than ever but still the stock price is not only underperforming but crashing 80-90%.

-We always wait till the quarterly conference calls to get our queries answered from the management but from the last few calls you are taking only 2-3 questions from the shareholders. We understand that explaining business updates to shareholders is important but there are other equally important matters to be addressed by you to the shareholders. We request you to take more questions from shareholders in the conference calls.

-Why did the auditors resign in the middle of their term? And that too when the final result of the forensic audit is not out yet.

-How is auditor resigning in the middle of their term in the best interest of all the parties? (especially to the company as mentioned by you in the update)

-Whom will you appoint as the next auditor? How much time will it take?

-Why did the promoter group do contra trades during lock-in period? These type of activities not only impact negatively on you personally but will impact the company and its shareholders also. Already the perception of the company is negative because of the forensic audit and this will further bring more negativity.

-The company missed guidance numbers on revenue but did better on net profits. What is the reason for this and will you do as per guidance in the coming quarters? Can you give us the guidance on audio ad business and also on the standalone business?

-When will you complete the Audit Committee Review?

-Peer review of consolidated financial statements as directed by SEBI is still pending, when will this be done?

-In the recent investor presentation, you have mentioned that you might consider vertical integration by acquiring or partnering with companies in their industry supply chain. Can you please share your strategies and plans on this?

-Why won’t you consider buyback or ESOP trust buying from the open market? This not only will bring confidence to the shareholders but will also show that you are concerned about the company and the shareholders and that the management team believes that the company has good future.

-How did MediaMath’s bankruptcy impact Brightcom’s business?

-Why doesn’t BCG sponsor events like Digiday Publishing Summit, Adexchanger Programmatic IO, MWC, DMEXCO etc? Even smaller companies sponsor events like these which will help them add more clients and attract talent. (BCG participates in these events but doesn’t sponsor)

[Author]

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