Cycle clothing brand Vulpine is "insolvent" and enters administration

Paul J wrote:

Fixie Girl: The Sunday Times is paywalled. People here may not be familiar with any new details in its article.

Article below... Enjoy

"When it raised more than £1m on crowdfunding platform Crowdcube in October 2015, Vulpine Performance seemed to have the wind behind it. The cycling clothing brand had shot glossy promotional films in Italy and Norway, struck a collaboration with the Olympic gold medallist Sir Chris Hoy and said it was on course to break even.

Less than two years later, it is about to collapse. Two partners from accountancy firm RSM are due to be appointed administrators tomorrow, with the likelihood of losses for about 600 shareholders, including several well-known angel investors. It has prompted one early backer to describe crowdfunding websites as “a ticking timebomb”.

Vulpine was set up by Nick Hussey, a former film maker, in 2010. A keen amateur cyclist, he said he wanted to escape the “snobbery” of the professional sport and create a brand that would appeal to casual riders.

Over the next few years he raised £1.1m in seed funding from backers including Philip Jenks, a founder of the publisher Harriman House, and Simon Hulme, a serial investor in start-ups. Several people who put in money said that Hussey, now 43, was enthusiastic and persuasive.

An investment banker said: “Everyone bought the cycling thing and everyone got that it was a lifestyle brand with a trendy look — you get off the bike and go into the pub.”

However, according to several early backers, Hussey insisted on spending large sums of money on marketing and refused to rein that in when challenged. Vulpine also struggled with retail basics, they said, often ordering large amounts of stock and then being forced to discount it aggressively, eroding the brand’s desirability. There were also some problems with late deliveries from Chinese factories, they added. Hussey said: “I am unable to comment during the administration process.”

Jenks and Hulme resigned from the board in frustration in 2015, followed by several other independent directors. In October 2015, Hussey turned to Crowdcube with the aim of raising £500,000. Although at the time he said it was an opportunity for fans to invest, a source said Hussey had “exhausted” his existing investor base.

Vulpine had announced its deal with Hoy earlier that year, and demand was so strong it raised £1m in a week, with at least one investor putting in £50,000. The fundraising valued it at £5m.

Vulpine burned through the money and failed to hit its sales targets. It remained loss making and tried to raise a further £750,000, at a £7.5m valuation, last month. This time it failed and was forced to call in administrators.

Hulme said: “Vulpine had failed abysmally to deliver what it had promised investors in the first round. To me, crowdfunding looks like a ticking timebomb.”

Crowdcube said it had complied with regulations and that, “whilst the failure of any business is disappointing, equity crowdfunding investments are high-risk and unfortunately not all businesses will provide an exit for shareholders”."

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<p>[quote=zero_trooper wrote:

"Were August Cycles ever paid for the 2 £10K vanity bikes? No sign of them on the A.C. website."

Hello @zero_trooper! We (August Bicycles) we were paid, as we are a small set-up and simply couldn't afford to take a chance on someone's word when we hadn't worked with them before. A real relief to us now, but sad times. They didn't cost even nearly as much as that to the Vulpine guys and the sale prices were heavily inflated, not by us, but for effect, we assume. We were told that they've been seized as company assets now, but have just been informed that is also a fib. Such a sad saga.

Thanks for getting back to us RRR, glad that you have been paid for what would appear to have been a labour of love. I raised the question as from previous experience in a specialist, niche market (craft brewing), there are plenty of charlatans out there who are very tardy over paying for goods/services. Which as you have stated can have a real negative impact on small businesses.

Keep making beautiful bikes  

Fixie Girl wrote:

Paul J wrote:

Fixie Girl: The Sunday Times is paywalled. People here may not be familiar with any new details in its article.

Article below... Enjoy

"When it raised more than £1m on crowdfunding platform Crowdcube in October 2015, Vulpine Performance seemed to have the wind behind it. The cycling clothing brand had shot glossy promotional films in Italy and Norway, struck a collaboration with the Olympic gold medallist Sir Chris Hoy and said it was on course to break even.

Less than two years later, it is about to collapse. Two partners from accountancy firm RSM are due to be appointed administrators tomorrow, with the likelihood of losses for about 600 shareholders, including several well-known angel investors. It has prompted one early backer to describe crowdfunding websites as “a ticking timebomb”.

Vulpine was set up by Nick Hussey, a former film maker, in 2010. A keen amateur cyclist, he said he wanted to escape the “snobbery” of the professional sport and create a brand that would appeal to casual riders.

Over the next few years he raised £1.1m in seed funding from backers including Philip Jenks, a founder of the publisher Harriman House, and Simon Hulme, a serial investor in start-ups. Several people who put in money said that Hussey, now 43, was enthusiastic and persuasive.

An investment banker said: “Everyone bought the cycling thing and everyone got that it was a lifestyle brand with a trendy look — you get off the bike and go into the pub.”

However, according to several early backers, Hussey insisted on spending large sums of money on marketing and refused to rein that in when challenged. Vulpine also struggled with retail basics, they said, often ordering large amounts of stock and then being forced to discount it aggressively, eroding the brand’s desirability. There were also some problems with late deliveries from Chinese factories, they added. Hussey said: “I am unable to comment during the administration process.”

Jenks and Hulme resigned from the board in frustration in 2015, followed by several other independent directors. In October 2015, Hussey turned to Crowdcube with the aim of raising £500,000. Although at the time he said it was an opportunity for fans to invest, a source said Hussey had “exhausted” his existing investor base.

Vulpine had announced its deal with Hoy earlier that year, and demand was so strong it raised £1m in a week, with at least one investor putting in £50,000. The fundraising valued it at £5m.

Vulpine burned through the money and failed to hit its sales targets. It remained loss making and tried to raise a further £750,000, at a £7.5m valuation, last month. This time it failed and was forced to call in administrators.

Hulme said: “Vulpine had failed abysmally to deliver what it had promised investors in the first round. To me, crowdfunding looks like a ticking timebomb.”

Crowdcube said it had complied with regulations and that, “whilst the failure of any business is disappointing, equity crowdfunding investments are high-risk and unfortunately not all businesses will provide an exit for shareholders”."

You forgot to mention that the article was 'headed' by a prominent photograph of Sir Chris.......awkward!

Fixie Girl wrote:

Potential red flags are:

Directors paid excessive salaries when the company cannot afford them.
Taking credit from suppliers where there was no "reasonable prospect" of paying the creditor on time
Deliberately increasing debt

FG

I've been half following this, and what a sorry tale:  misguided products in a very crowded, competitive market and, from what I've read, inept management.   If I were a crowdfunder looking to recoup I wouldn't get my hopes up. Whilst on the face of it the Wrongful Trading criteria seem to have been met,  one of the difficulties the crowdfunders may encounter is that crowdfunding tends to be structured as an equity investment (as opposed to a loan).  The Times article you posted hints at this.   Generally in insolvencies the first to recoup are those with a fixed charge over the company's assets (i.e. secured lenders - probably just stock in this case as they seem to have been outsouring manufacturing); the second are unsecured creditors (if any for a company with these accounts!), and 'equity investors', including non-voting ones (i.e. crowdfunders) wait at the back.... but I wouldn't hold my breath whilst I waited.

Chris Hayes wrote:

Fixie Girl wrote:

Potential red flags are:

Directors paid excessive salaries when the company cannot afford them.
Taking credit from suppliers where there was no "reasonable prospect" of paying the creditor on time
Deliberately increasing debt

FG

I've been half following this, and what a sorry tale:  misguided products in a very crowded, competitive market and, from what I've read, inept management.   If I were a crowdfunder looking to recoup I wouldn't get my hopes up. Whilst on the face of it the Wrongful Trading criteria seem to have been met,  one of the difficulties the crowdfunders may encounter is that crowdfunding tends to be structured as an equity investment (as opposed to a loan).  The Times article you posted hints at this.   Generally in insolvencies the first to recoup are those with a fixed charge over the company's assets (i.e. secured lenders - probably just stock in this case as they seem to have been outsouring manufacturing); the second are unsecured creditors (if any for a company with these accounts!), and 'equity investors', including non-voting ones (i.e. crowdfunders) wait at the back.... but I wouldn't hold my breath whilst I waited.

Agreed, there are 2 charges on HSBC according to companies house. Cannot discover how much for though. Both were taken out this year which starts alarm bells ringing.

The current stock is valued at £250k, imho this is optimistic ESP if the administrator move to liquidate.

Paul J wrote:

What about one secured charged being repaid days before administration? That surely was to evade the rules on administration, debt priority and winding up of companies?

I saw that - the one repaid to the Director's lending company... the security was comprehensive in terms of the stuff it nails down so my guess is that is is more likely to have been repaid to get another secured loan - possibly from HSBC.  As you can see below, the Fixed Charge T&Cs seem incompatible the offer of further security. 

By the way - you'd have to be over a barrel to enter into T&Cs such as this, anyway.  Something the Credit Officers for the Crowdfunder should have picked up easily.  

Here's the charge that was repaid.  I would imagine the new charge mirrors this. If it is then the new lender owns the stock, trademarks, IP, everything.

As continuing security for the payment of the secured liabilities the borrower with full title guarantee:. (A) charges to the lender by way of legal mortgage all freehold or leasehold property owned by the borrower at the date of this deed;. (B) charges to the lender by way of equitable mortgage its interest in any freehold or leasehold property acquired by the borrower after the date of this deed;. (C) charges to the lender by way of fixed charge its interest in:. (I) all existing and future fittings, plant, equipment, machinery, tools, vehicles, furniture and other tangible movable property;. (Ii) any investment;. (Iii) its existing and future goodwill and uncalled capital;. (Iv) the debts and all existing and future cash at bank;. (V) any intellectual property;. (Vi) any money now or at any time after the date of this deed standing to the credit of any designated account; and. (Vii) to the extent not otherwise subject to any fixed security in favour of the lender:. (A) any existing and future proceeds of any insurance of any charged property; and. (B) any sum now or at any time after the date of this deed received by the borrower as a result of any order of the court under sections 213, 214, 238, 239 or 244 of the insolvency act 1986;. (d) assigns to the lender by way of fixed charge its interest in and the benefit of all agreements for the supply of goods or services by the borrower entered into on or before the date of this deed and the benefit of any guarantee or security for the performance of any of such agreements or other documents provided that if any such agreement, other document, guarantee or security is expressed to be non-assignable then the borrower charges to the lender by way of fixed charge its interest in and the benefit of it.
Contains fixed charge.
Contains floating charge.
Floating charge covers all the property or undertaking of the company.
Contains negative pledge.

Fixie Girl wrote:

There is no smoking gun on the grassy knoll but a catalog of avoidable and repeated mistakes.

Also known as human error.

I don't have a dog in this fight - I have never purchased anything from Vulpine (although in a strange coincidence I met a bloke last week who was wearing an item of Vulpine attire .... spooky), I wasn't an investor and I don't know any of the individuals involved.

At the risk of stating the obvious, this isn't a story about cycling, it's the same hackneyed tale of capitalism that's been played out for more than a century (at least). Businesses fail, stakeholders - owners, investors, lenders, suppliers, customers - lose money. Equity investing was traditionally a game for grown ups, although incremental deregulation of markets has meant that retail investors can also aspire to be "#stockmarketsuperheroes". In "proper" markets those investors are protected (to a greater or lesser degree, depending on how jaundiced your perspective is) by a regulatory framework that prioritises disclosure and standards of behaviour (that some people still manage to circumvent/disregard). The revolutionary growth of non-traditional investment platforms has unsurprisingly outpaced the evolutionary pace of regulation. CrowdCube is more akin to the betting shop and probably should carry the same warning that "When the fun stops .. stop". As its disclaimer says: "Investing in start-ups and early stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. Crowdcube is targeted exclusively at investors who are sufficiently sophisticated to understand these risks and make their own investment decisions. You will only be able to invest via Crowdcube once you are registered as sufficiently sophisticated." If you lost money that you invested in Vulpine via CrowdCube and you feel robbed, congratulations, you've just paid to learn that you aren't sufficiently sophisticated to understand the risks and to make your own investment decisions. 

As for suing the directors - good luck with that. Even if liability can be established, the proceeds will be negligible (management won't be worth much) and be swept up by the secured creditors.

Chalk it up to experience and move on.

surly_by_name wrote:

Fixie Girl wrote:

There is no smoking gun on the grassy knoll but a catalog of avoidable and repeated mistakes.

Also known as human error.

I don't have a dog in this fight - I have never purchased anything from Vulpine (although in a strange coincidence I met a bloke last week who was wearing an item of Vulpine attire .... spooky), I wasn't an investor and I don't know any of the individuals involved.

At the risk of stating the obvious, this isn't a story about cycling, it's the same hackneyed tale of capitalism that's been played out for more than a century (at least). Businesses fail, stakeholders - owners, investors, lenders, suppliers, customers - lose money. Equity investing was traditionally a game for grown ups, although incremental deregulation of markets has meant that retail investors can also aspire to be "#stockmarketsuperheroes". In "proper" markets those investors are protected (to a greater or lesser degree, depending on how jaundiced your perspective is) by a regulatory framework that prioritises disclosure and standards of behaviour (that some people still manage to circumvent/disregard). The revolutionary growth of non-traditional investment platforms has unsurprisingly outpaced the evolutionary pace of regulation. CrowdCube is more akin to the betting shop and probably should carry the same warning that "When the fun stops .. stop". As its disclaimer says: "Investing in start-ups and early stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. Crowdcube is targeted exclusively at investors who are sufficiently sophisticated to understand these risks and make their own investment decisions. You will only be able to invest via Crowdcube once you are registered as sufficiently sophisticated." If you lost money that you invested in Vulpine via CrowdCube and you feel robbed, congratulations, you've just paid to learn that you aren't sufficiently sophisticated to understand the risks and to make your own investment decisions. 

As for suing the directors - good luck with that. Even if liability can be established, the proceeds will be negligible (management won't be worth much) and be swept up by the secured creditors.

Chalk it up to experience and move on.

 

You make some very good and valid points on investments, CrowdCube and capitalism.

However, I think the outrage on this forum and in general is due to Nick and Crowdcube's outlandish promises, spectacular failure to deliver, nepotism, greed, frankly not being straight with people who backed them with their hard earned cash!

surly_by_name wrote:

As for suing the directors - good luck with that. Even if liability can be established, the proceeds will be negligible (management won't be worth much) and be swept up by the secured creditors.

I wouldn't be so sure - http://www.helix-law.co.uk/blog/22-director-s-liability-on-company-insol...

Whether invesotrs can be deemed as creditors is for somebody in a court to decide I guess.

This is why Directors & Officers insurance exists - so you don't lose your house if the proverbial hits the fan and you're sued.

Rapha Nadal wrote:

surly_by_name wrote:

As for suing the directors - good luck with that. Even if liability can be established, the proceeds will be negligible (management won't be worth much) and be swept up by the secured creditors.

I wouldn't be so sure - http://www.helix-law.co.uk/blog/22-director-s-liability-on-company-insol...

Whether invesotrs can be deemed as creditors is for somebody in a court to decide I guess.

This is why Directors & Officers insurance exists - so you don't lose your house if the proverbial hits the fan and you're sued.

I guess there is a principle here, what has happened just sticks in my throat...

Especially when I reread this from road.cc piece on round two funding...

“Again, we want you to own us. To influence us and to be part of our story. To see it from the inside. I’ve loved having 577 customers and friends as co-owners.

“Like our wares, shares are limited,” he added. “Many lost out last time, as we raised so much faster than expectations. Grab a piece of us while you can.”

Judging by the responses RSM its toast.

There is also a rumour doing the rounds over here already that someone bought himself a $1M home in Dec.. Its still too early for me to confirm..  Perhaps one of you guys could do some digging while the caffeine kicks in here

Miggers wrote:

A thorough piece of journalism over at Bikebiz...

http://www.bikebiz.com/news/read/what-the-hell-happened-at-vulpine/021275

Quality. But... that's Carlton Reid for you. Old school honesty and commitment. Love the guy.

amazon22 wrote:

Fixie Girl wrote:

There is also a rumour doing the rounds over here already that someone bought himself a $1M home in Dec.. Its still too early for me to confirm..  Perhaps one of you guys could do some digging while the caffeine kicks in here

Hussey's house was sold on 13 December 2016 for £685,000.

Do you have a link please?

Fixie Girl wrote:

amazon22 wrote:

Fixie Girl wrote:

There is also a rumour doing the rounds over here already that someone bought himself a $1M home in Dec.. Its still too early for me to confirm..  Perhaps one of you guys could do some digging while the caffeine kicks in here

Hussey's house was sold on 13 December 2016 for £685,000.

Do you have a link please?

https://beta.companieshouse.gov.uk/company/07211640/officers

http://www.rightmove.co.uk/house-prices/detailMatching.html/svr/3114;jsessionid=0E79DA64664E58BB3E605C059244C283?prop=44123487&sale=89280156&country=england

dubtap wrote:

Fixie Girl wrote:

amazon22 wrote:

Fixie Girl wrote:

There is also a rumour doing the rounds over here already that someone bought himself a $1M home in Dec.. Its still too early for me to confirm..  Perhaps one of you guys could do some digging while the caffeine kicks in here

Hussey's house was sold on 13 December 2016 for £685,000.

Do you have a link please?

 

https://beta.companieshouse.gov.uk/company/07211640/officers

http://www.rightmove.co.uk/house-prices/detailMatching.html/svr/3114;jsessionid=0E79DA64664E58BB3E605C059244C283?prop=44123487&sale=89280156&country=england

Does this mean we dont know where he lives...? Now thats a crying shame! 

VeloPeo wrote:

Much as it appears he's been pretty unethical, and much as I don't like the bloke, posting up his home address details is a bit out of order 

It's all in the public record. It's not like anyone has doxxed him.

Plus Nick was never shy of publicity before.

TrekAndy wrote:

If you look through the accounts and registered addresses and the sales history of Mr.Husseys house it would appear he has transferred/sold the house to his Mrs. That way they cant lose it can they................

I've been reliably informed that neither Nick nor his wife own the property in question. 

Fixie Girl wrote:

TrekAndy wrote:

If you look through the accounts and registered addresses and the sales history of Mr.Husseys house it would appear he has transferred/sold the house to his Mrs. That way they cant lose it can they................

I've been reliably informed that neither Nick nor his wife own the property in question. 

Why would he lose the house anyway?  Vulpine is a limited company - it's he company that's gone bust, not Nick personally. 

SimonS wrote:

Why would he lose the house anyway?  Vulpine is a limited company - it's he company that's gone bust, not Nick personally. 

No, but a director may be personally liable to creditors (not, I think, shareholders) if the company was trading while insolvent.  It sounds as though Vulpine may have been technically insolvent for some time. 

SimonS wrote:

Fixie Girl wrote:

TrekAndy wrote:

If you look through the accounts and registered addresses and the sales history of Mr.Husseys house it would appear he has transferred/sold the house to his Mrs. That way they cant lose it can they................

I've been reliably informed that neither Nick nor his wife own the property in question. 

 

 

Why would he lose the house anyway?  Vulpine is a limited company - it's he company that's gone bust, not Nick personally. 

Depends if any loans were secured on it.

Shouldn't he update Companies House of his new address if he moved in Dec 16?

gva wrote:

Are any shareholders planning to come together to find out what is actually happened and if there are options for recourse?

I understand the @lairdelmski on Twitter is raising a posse. He is well connected in the City of London and the press.

FG