Ensogo shuts down SEA marketplaces, suspends ASX trading, CEO resigns

Troube FINAL

The news comes in a year of massive employee layoffs, a plummeting stock price and the resignation of multiple leadership executives

2016 will be a year to forget for Ensogo.

Over the last few months, the stock has plummeted, Board Directors have resigned, half the staff was laid-off and today the company announced the closing of its Southeast Asia marketplaces, the suspension of trading on the ASX and the resignation of its CEO.

This morning, the company was granted a voluntary suspension of all trading activity citing a need to reposition itself to satisfy the requirements for listing on the ASX. This comes days after the trade was halted on Friday, pending an announcement of the financing situation of its subsidiaries.

Since this time last year, the stock price has slid from AUD3.40 (US$2.54) per share to AUD0.65 (US$0.49), essentially making it a penny stock. The company’s peak listing price was AUD12.47 (US$9.32) in March of 2014.

Which brings into the picture the announcement today that Ensogo will “no longer provide financial support to its subsidiary Southeast Asian flash sales and marketplace business units”.

In a statement given to e27, Ensogo wrote:

“These business units will be shut down. All staff (workers) have been informed and communications will be made to customers in the coming days.”

Furthermore, the company will be navigating the rough waters ahead without its CEO Kris Marszalek, whose resignation was also accepted today. Non-executive Director Thomas Baum’s resignation was announced on Thursday and on May 20, it was announced that Non-executive Director Fredrique Covington also stepped down.

“These decisions have been made to preserve the company’s cash for new investment opportunities,” the statement read.

Today’s news does not come in a vacuum. In 2016, Ensogo laid off half of its staffers (300 people) over the first few months of the year citing widening losses.

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In May, the investment bank Macquarie Group offloaded 2.4 million shares of the stock at a price of AUD0.50 (US$0.37) per share. The same month, Royal Bank of Canada Global Asset Management Inc. ceased to be a substantial holder in the company.

The genesis for the current troubles is a company built on an outdated business model struggling shed its brand as it pivoted towards a different strategy.

Originally called iBuy, the company was a Groupon-style deals site when it was founded in 2013 by Marszalek and Patrick Linden with support from Catcha Group. As the Groupon model faded and staying power waned, Ensogo pivoted to become a mobile e-commerce marketplace that offered extreme sales (I’m currently looking at an Avenger’s kids toy that has been marked down by 87 per cent).

But the transition has not been smooth, and today’s announcements is the culmination persistent merchant complaints and business operation concerns.

In March, it reported a Q1 net operating loss of AUD11.213 million (US$8.4 million). In its 2015, Ensogo was running and operations deficit of AUD78.2 million (US$58.4 million) which increased from the 2014 number of AUD68.1 million (US$50.1 million).

Basic earnings per share were also in the negative — AUD2.47 (US$1.85) loss per share.

It should be noted total assets nearly tripled from AUD12.2 million (US$9.1 million) in 2014 to AUD34.1 million (US$25.5 million) in 2015.

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While investors, founders and anyone with skin in the startup game point to the lack of IPO exits as a problem in need of fixing, the current string of bad news coming out of the Ensogo camp is an example as to why an individual company may be hesitant to leap into a public listing.

Photo courtesy of Pixabay.

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