Dusseldorf, Berlin Social Chain AG did not deliver the second bad news of the day until just before midnight on Wednesday. The board of former Pro-Sieben chief executive Georg Kofler, 65, said the planned capital increase by issuing 4.5 million new shares had been postponed.
Social Chain is known to the wider public for the talent show “Die Höhle der Löwen”, in which leading figures such as Kofler and his 56-year-old business partner Ralf Dümmel serve as judges to rate the young founders on the TV show. If a startup is doing well, it may want to strike a deal with investors.
Social Chain also benefits from it. Thanks to television, some observers speak of a “biggest share,” or even of a new “people’s share.” Kovler, who has been CEO of the publicly traded company since the beginning of the year, also holds a 36% stake in the company.
He wants to continue with the capital increase. His Georg Kofler GmbH was supposed to bring loan claims into the social chain. In return, he will receive 2.5 million new shares. Other shareholders receive new shares at a price of 2.60 euros.
But they let Kovner down. They exercised only 1.9% of their entitlement. That’s just 36,845 new shares. This reluctance may have something to do with recent newspaper offers that were lower than the subscription price required for the capital increase.
new money will come in handy
Proceeds from the offering will be used to fund business activities, as Social Chain announced in June. The share capital should increase to EUR 20.2 million. Fresh funding is very convenient for companies.
The financial data of the past few years has witnessed a catastrophic trend: a negative 72.5 million euros in 2021, and even a loss of 106.8 million euros in 2022.
A “next generation brand and product company” wants to offer its customers consumer products like nose trimmers or cat furniture. The share price climbed to almost 60 euros as the TV business was boosted. After the companies merge in late 2021, Kovner and Dumel dream of a future valuation worth billions of dollars — and many investors, convinced by a jury on television.
Georg Kofler (left) and Ralf Dümmel are famous on TV as jurors for start-ups, but their social link AG is now in crisis.
(Photo: Social Chain AG)
However, the sudden drop in the value of the stock, before the financial watchdog also spoke on Wednesday, shows how far apart TV reality and actual business can sometimes be.
Bafin condemned the misbooking of nearly 60 million euros in the 2021 consolidated financial statements. In the statement of cash flows, the public limited company reports the payment for the sale of shares and the EUR 50 million loan as cash flows from operating activities.
>> Read here: Bafin finds incorrect postings in consolidated financial statements
Social Chain emphasized that the error did not affect the balance sheet. It’s just about “misallocation of transactions in the statement of cash flows”. Still embarrassing. Such glitches could undermine investor confidence.
Another bombshell showing just how little people depend on each other these days. According to Social Chain, investors did not pay the contractually agreed payments. As part of the capital increase, some lenders, including shareholders, have agreed to purchase the remaining shares at a subscription price. On Wednesday, the board announced that one of the so-called backing investors had not paid on time.
A well-known German capital markets lawyer commented to Handelsblatt: “Wow, I’ve never seen a case in which an investor is supported not to pay.” These are binding agreements. Other shareholders may have subscribed and believe that backing investors are indeed present.
The question, therefore, is whether the capital increase will be at least partially implemented, and whether the company is willing to make claims against investors who do not want to raise capital. Social Chain has yet to comment. Michael Kunert of the Investor Protection Society (SdK) stressed on Thursday that breaches of guarantee contracts would be subject to jurisdiction.
Investor Advocates Are Extremely Concerned
“The whole thing is extremely concerning given the state of society,” Kunert said, calling the company’s announcement “vague” because it didn’t even mention the extent of the impact. “Shareholders are now awaiting information on what this means.”
For short-term requests, Social Chain did not disclose which backing investors it is. The company did not want to disclose any further details, citing an “obligation of confidentiality”. Asked whether Social Chain’s financing would be secured even without a capital increase, a spokesperson replied: “The review is ongoing. Any results must first be communicated in the manner required by law.”
In addition to Kovner, there are three other people on this list of major shareholders who can be included in Dumer’s circle. Former CEO Wanja Oberhof owns about 17.2 percent, directly and indirectly. At the end of the year, he left the board at the same time as Dumer.
Almost 16% of the shares belong to a company owned by Hanno Hagemann. He is married to the daughter of the late entrepreneur Dieter Schwarz, who Dummel calls his “adoptive father.” Finally, the third person is Dumeier himself, who holds a five percent stake.
Oberhoff and Dummel signed incorrect annual financial statements — both are no longer in office. Apparently, more and more financiers are doubting Kovner’s ability to turn things around. The stock had fallen 13% as of early Thursday afternoon.
more: Bafin Finds Millions of Errors in Social Chain AG’s Consolidated Financial Statements for 2021