Dusseldorf, Berlin Social Chain AG waited until just before midnight on Wednesday before publishing the second bad news of the day. The planned capital increase through the issue of 4.5 million new shares has been delayed, said the board of directors around ex-Pro-Sieben CEO Georg Kofler, 65.
Social Chain became known to a broader public with the talent show “Die Höhle der Löwen”, in which leading figures such as Kofler and his business partner Ralf Dümmel, 56, acted as jurors and rated young founders in the television show. If a start-up did well, it could hope for a deal with investors.
Social Chain also benefited from this. Because of the TV presence, some observers spoke of the “lion’s share” or even of a new “people’s share”. Kofler has been CEO of the public company since the beginning of the year, in which he also holds a 36 percent stake.
He wanted to go ahead with the capital increase. His Georg Kofler GmbH was supposed to bring loan claims into the social chain. In return, he would have received 2.5 million new shares. The other shareholders were offered the new shares at a price of EUR 2.60.
But they of all people let Kofler down. They only exercised 1.9 percent of the subscription rights to which they were entitled. That’s just 36,845 new shares. The reluctance may have to do with the fact that the papers have recently been quoted below the subscription price demanded in the capital increase.
Fresh money would come in handy
As Social Chain announced in June, the proceeds from the issue are to be used to finance business activities. The share capital should increase to 20.2 million euros. Fresh money would be very convenient for the company.
The financial data of the past few years bear witness to a disastrous trend: a minus of 72.5 million euros in 2021 and even a loss of 106.8 million euros in 2022.
The “brand and product house of the next generation” wants to supply its customers with consumer goods such as nose hair trimmers or cat furniture. With the tailwind of the TV presence, the share price climbed to almost 60 euros. At the end of 2021, after the merger of their companies, Kofler and Dümmel dreamed of future valuations worth billions – and with them many investors who were convinced by the appearance of the jury on television.
Georg Kofler (left) and Ralf Dümmel became known on TV as start-up jurors, but their social chain AG is now in a crisis.
(Photo: Social Chain AG)
However, the abrupt drop in value of the share showed how far apart television reality and real business sometimes are – before the financial supervisory authority also spoke up on Wednesday.
The Bafin denounced incorrect bookings of almost 60 million euros in the 2021 consolidated financial statements. In the cash flow statement, the public limited company reported payments from the sale of shares and a 50 million euro loan as cash flow from operating activities.
>> Read here: Bafin finds incorrect postings in the consolidated financial statements
Social Chain emphasized that the error did not affect the balance sheet. It is only about “incorrect assignments of transactions within the cash flow statement”. It’s still embarrassing. Such glitches can erode investor confidence.
Another explosive incident shows how little people can now rely on each other. According to Social Chain, an investor did not make contractually agreed payments. As part of the capital increase, some lenders – including shareholders – had agreed to purchase the remaining shares at the subscription price. On Wednesday, the board announced that one of the so-called backstop investors had not paid on time.
A well-known German capital market lawyer commented to the Handelsblatt newspaper: “Wow, I’ve never seen a backstop investor not pay either.” These are binding agreements. Other shareholders may have subscribed, confident that a backstop investor is actually on hand.
The question therefore arises as to whether the capital increase will be implemented at least in part and whether the company would like to assert claims against the investor who is unwilling to pay. Social Chain did not want to comment on this yet. Michael Kunert from the Protection Association of Investors (SdK) emphasized on Thursday that a breach of backstop contracts would be justiciable.
Investor advocates are extremely concerned
“The whole thing is extremely worrying in view of the state of society,” said Kunert. He called the company’s announcement “vague” because it didn’t even mention the magnitude affected. “Shareholders are expecting information about what that means now.”
In response to a short-term request, Social Chain did not say which backstop investor it was. The company did not want to disclose any further details and referred to “confidentiality obligations”. When asked whether Social Chain’s financing would be secured even without a capital increase, a spokeswoman replied: “The review is ongoing. Any results would first have to be communicated in the manner prescribed by law.”
In addition to Kofler, there are three men on this list of major shareholders who can be assigned to Dümmel’s circle. Former CEO Wanja Oberhof directly and indirectly holds around 17.2 percent of the shares. He left the board at the same time as Dümmel at the end of the year.
Almost 16 percent belong to a company owned by Hanno Hagemann. He married the daughter of the late entrepreneur Dieter Schwarz, whom Dümmel in turn calls his “foster father”. Finally, the third person is Dümmel himself, who holds five percent of the shares.
Oberhof and Dümmel signed the incorrect annual financial statements – both are no longer in office. Apparently, more and more financiers have doubts as to whether Kofler can successfully turn things around. By early Thursday afternoon, the stock was down 13 percent.
More: Bafin finds millions of errors in the 2021 consolidated financial statements of Social Chain AG