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Afsalon Brands
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, which operates e-commerce stores mainly through Amazon’s platform, fell from its peak two years ago by 95% to a value of NIS 14 million. Its capital as of the end of June (the company reports twice a year) is over NIS 70 million. This of course means that the market does not believe in equity. This company, which is built on acquisitions of trade websites and trying to improve them, has failed time and time again. It has a reputation for failures while on the balance sheet there is goodwill (and intangible assets) worth NIS 50 million – this does not represent real value.
The company is losing money and burning cash and it needs money now. It is going public and not a rights issue, which is the chosen alternative for most companies of its type. A rights issue is structured so that there are high chances of being exploited. The company’s management – Yair Biton, the chairman, and Ariel Dor, the CEO, who own 18% of the company, chose a public offering after the share price continued to fall by more than 50% since the beginning of the year. They probably know there are good prospects for an IPO.
The company will issue 4.5 million units (after a reverse split of 1 for 5) in addition to up to 675 thousand additional ordinary shares that will be offered in case of oversubscription, in exchange for NIS 4.5 million. This roughly expresses the market price, the company actually raises money according to a value of about NIS 15 million before the money. This means that the market value is fixed and this is a huge and clear indication for the accountants to make write-offs in the books. The capital is not 70 million if there is a big deal in the market for NIS 15 million.
And against this background, just before the IPO, Afslon reports the results of the entire year. The company expects revenues of 16.7 million dollars in the entire year of 2022, which is impressive, because it is more than 10 million dollars in the second half. The expected loss is $9.8 million, but note – most of it, about $9.5 million, is write-offs of intangible assets and inventory. At the operational level, the situation seems reasonable. Even an improvement over the first half.
The company’s cash balance, as of today (the date of publication of the shelf offer) stands at 630 thousand dollars and according to the company’s expectations, it will generate a cash flow from current operations in the coming year in the amount of about 2 million dollars, mainly thanks to the inventory that the company already has.
On the one hand, an issue that is done under pressure when the share price drops and the company needs cash. On the other hand – precisely at this price it may be an opportunity. Do you know a business that is worth NIS 15 million and generates NIS 7 million in cash per year? So maybe these are predictions that will help – intended to help the IPO, it just seems that the company has believers. Kafir Zilberman, the skeleton dealer, owns 7.3% of the company’s shares and also has loans he gave it. Avi Beggs became an interested party (over 5%) in November last year and continued to buy at double the price from today until holding 9%. Beggs was also appointed a director of the company recently. After the continued fall in the shares, will he, Kafir Zilberman and or the founders and owners, Yair Biton and Ariel Dor buy shares at half the price three months ago? could very well be. For their approach it can be an opportunity cost.
However, it should also be remembered that until now, the company has mostly managed to fail and survived only thanks to recruitments. At the operational level, it did not meet the revenue, profit and profitability forecasts, although the second half figures show a dramatic improvement.
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