Seem Successful But His Company Loses Money

[carenski]

Good morning to all, my first time posting here.

I'm looking to improve my understanding of business knowledge so in my routine I've dedicated 30 minutes per day to studying companies/directors to see what they are doing.

This guy here seems to be worth £70 million and employs 150 people. But when I checked the filings for the Thrive company and his personal one here and here is losing money like there is no tomorrow.

In the meantime, he just bought a new Lamborghini as you can see on his Instagram.

Based on my understanding, it seems that in order to afford a luxury car and lifestyle, one should ideally be reporting positive tax returns at least at some point.

Is there something I might be missing or misunderstanding in this scenario?

 

[jedi4christ]

@carenski 1: Public valuations in the media don’t mean much. £70m valuation at (probably) a 10x multiple, would put ARR at £7m. Doesn’t mean it’s worth that, as it hasn’t sold or gone to IPO.
Private companies, particularly startups, can have huge valuations that are ‘empty’ until they actually sell or go public. So until that point, take all valuations with a bucket of salt.
Companies are also incentivized to report a massive valuation as it makes them look bigger/better/etc than they really may be.

2: Just because the company is losing money, doesn’t mean he isn’t getting paid. Company finance =/= personal finance.

 

[carenski]

@jedi4christ Thanks for the explanation.

In the filing, the creditor amount falling due in one year is at 4.5 million, an increase from 2.6 million the previous year.

Then you have the shareholders deficit of 8.7 million up from 3.4 million the previous year.

Does that mean he is getting paid to sink the company?

 

[jedi4christ]

@carenski I’m not an accountant, so I can’t speak to exactly how they are accounting/where that deficit is being funded from.

But from a business perspective, they are in ‘growth at all costs’ mode.
So, they are burning VC/debt in order to scale rapidly and capture market share.
At some point, they’ll be planning to move to profitability.
But looking at their YoY numbers, they are aggressively chasing down growth currently.

They have ~6 months cash burn on hand, so they are likely out looking for finance right now, or they have already have a credit line they can draw down on.

It’s not uncommon for startups in high growth mode, doing those revenue numbers, to be paying the CEO £200k+.
They are chasing down new users (growth), and that’s what the board will be targeting the CEO on, so as long as he’s hitting those targets, he’ll be getting paid.

In the long run, is this a good move? Yes, so long as they can finance the deficit. If the money runs out or the growth does….then you’ll see changes.

Edit: also, that isn’t creditor amount due, that’s the drawdown taken on to find. The actually debt/interest due is like £150k (iirc), so this is likely being equity funded or they are accruing debt and just don’t have repayments due yet.

 

[carenski]

@jedi4christ Thank you very much for the well-rounded answer. It's eye opening.

 

[childofgod43]

@carenski Want to make money? Focus on yourself

 

[ittwirbaacs]

@carenski And the elephant in the room? "Creditors: Amounts falling due after more than one year 11,067,311". Per Note 12. this massive amount consists primarily of "Other Creditors" - no further explanation provided - of 10,952,714. What the hell. This thing is COMPLETELY insolvent.

 

[carenski]

@ittwirbaacs I'm not sure they are insolvent just yet.