Messi is cited more than 300 times in MGO Global’s IPO prospectus, which is registered with the United States Securities and Exchange Commission. There are also numerous photos of him. The company has an agreement on the sale of clothing branded by the star of the Argentine national team and PSG. For a company whose profitability is in doubt and which has less than two years on Messi’s contract, the timing for the IPO seemed ideal as the footballer was recently crowned world champion with Argentina. The Miami-based company made its debut on the Nasdaq in the United States this Friday, and the debut was a bit bumpy.
The listing price was $5 per share. The company’s founders and shareholders have invested $4.1 million in the company prior to the IPO at a price of $0.35 per share. Without the company having proven profitable, the selling price of the new shares was that $5. 1.5 million titles were placed, so the new partners placed almost twice as many as the original at 7.5 million. However, since they got in at a higher price, they received far fewer shares, about 11% of the capital. The placement may be increased by an additional 330,000 shares, with some funds remaining on the street due to the cost of the IPO.
At this price of 5 dollars per share, MGO Global was valued at around 58 million euros and the value of the shares of the two main shareholders, Maximiliano Ojeda (Executive President) and Virginia Hilfiger, (design director and little sister of Tommy Hilfiger) was around 20 million worth and multiplied the value of their investment by more than 10.
When the shares went live, Messi’s claim outweighed possible doubts about the company’s true worth. The price has skyrocketed, reaching a maximum of $16.61, representing a 232% increase over the placement price and an average return of 4,645% over the price at which the original shareholders invested (it’s always much higher for the founders and lower for those who came into the capital last year at a price of $1 a share through a private placement).
The party didn’t last long. After hitting this high, stocks have taken the roller coaster downtrend to return to where they started or even a little lower. The price closed at €4.65, a 7% loss from the placement price, but no less than 72% for those unfortunate enough to buy at the session’s highest price.
doubts about the company
Even with the ensuing crash, MGO Global, a company with four employees, is worth about $54 million in the stock market. Not bad for a company that states in its IPO prospectus, “Due to our historical recurring losses and negative cash flows from operations, as well as our reliance on private capital and our reliance on private equity, there are significant doubts about our ability to continue our business as a going concern.
MGO was founded in 2018 and received its current corporate form in 2021. The company recognizes that the only asset in its product portfolio is the Messi brand, which it uses for clothing. For this brand, they have reached an agreement with the company that manages the Barcelona-based Argentinian star Leo Messi Management (LMM). Basically, the deal sees Messi receive a royalty of 12% of sales of his brand’s clothing billed by MGO, but the Argentine star guarantees at least €4m for a deal that will last three years and is not automatic. MGO Global therefore debuts on the stock exchange with two years remaining on its contract with Messi.
In the first nine months of 2022, the first year of the current agreement, the company has generated net sales of $336,701, which doesn’t even cover the guaranteed minimum payment to Messi. At the moment, the Messi style doesn’t seem to have had much success in evening wear.
The company has suffered losses of $1.86 million from January to September. She’s already had big losses in previous years and expects them to continue to occur. In the prospectus he makes no bones about it: “We cannot predict when, if ever, our operations will be profitable. We anticipate significant net losses as we continue to develop our business and pursue our business strategy. We intend to make significant investments in our business before we believe that cash flow from operations will be sufficient to support our operating expenses.” A dividend, of course, has never been paid and is not expected “anytime soon.”
Prior to the IPO, the company had consumed all of the capital invested by shareholders and had negative equity: “As reported in our financial statements, as of September 30, 2022, we had an accumulated deficit of $5,072,751.”
The company estimated that it would raise between $5.9 million and $6.9 million with the IPO and said in the brochure that it would use 65% (about $3.8 million) for team building and marketing the other 35% (around $3.8 million). $2.1 million) “for general corporate and administrative purposes, including working capital and capital expenditures.”
Despite its precarious financial position, MGO Global says it “intends to acquire other apparel companies to expand our portfolio of brands”, although there seems to be no rush: “At this time we have no active discussions or negotiations with No acquisition target.”
The IPO prospectus is full of risk warnings, starting with the fact that those who subscribed to the new $5 shares immediately suffered a $4.61 dilution in the company’s tangible book value or that the contract with LMM, Messis Company, ending December 31st. 2024 and there is no guarantee it will be extended. Therefore, there is one that stands out: “Our business could suffer untold damage if we lose our relationship with LLM or otherwise breach the terms of our license agreement.”
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