Sale #9: Sold Oliver’s Real Foods

I’ve sold Oliver’s Real Foods (ASX: OLI), hopefully not permanently, but I’ve seen a few things that made me uncomfortable. In a nutshell it appears to me as though this company is being managed for the short term, not a lifetime.

The original thesis went like this:

  • Oliver’s has great niche and underserved customers, minimal competition in its niche due to nature of servo leases + roadside properties
  • Small and ability to become several times larger via steady roll-out of stores
  • There were some negative reviews on franchised restaurants; after they were bought back, and with some corporate attention I assumed quality would improve (anecdotally the worst restaurant looks quite sharp now, so I thought there was progress)
  • However I also thought that Oliver’s was priced at basically the maximum of what the market would pay. I thought that customer price point was a bit elastic due to the nature of the product, but if Oliver’s put prices up any further, they’d risk damaging their brand/alienating customers. (Oliver’s then raised prices in the most recent quarter.)
  • I thought that their fresh food supply chain was an important weakness and expected the company to expand steadily partly as a result of that (ability to source supply was constrained).


Things were progressing OK, except:

  • There has been a heap of negative reviews on Facebook in recent months even after accounting for school holidays.
  • Negative reviews overwhelmingly focus on a) unfresh food and b) pricing.
  • Oliver’s put prices up in its latest quarter. This means that its quoted SSS growth of 5.7% is not nearly as good as it appears.
  • After accounting for increasing store maturity, I suspect that Oliver’s transaction #s are flat or only growing slightly
  • I got sent a post on Hotcopper which spooked me a bit. I couldn’t verify some of that (indeed some of those employees still appear to be employed by Oliver’s), however the company did not respond when I emailed them.
  • Concerned above company social media responses (see below)


A lot of that is anecdotal evidence, but if you add the anecdotal evidence together with the concrete stuff (price increases) I think that uncertainty around Oliver’s has increased significantly. I think that with prices still increasing, Oliver’s risks damaging their compact with customers in return for a boost to short term results.

There are also these images which suggested I should be concerned over the quality of some of the company’s staff:


Sorry Rhyanon, your facts aren’t correct mate.  Get your shit together.

And here we have Anthony, clearly a cretin who goes out of his way to tell pork pies on Oliver’s social media:

Sooo yeah it would be fair to say I have some concerns about the quality of Oliver’s staff, by which I mean the muppet responding to these reviews should be dragged out by his fucking ankles.

I mean, if you’re going to respond to customer reviews, you just can’t call them liars and imply that they should fuck off! At the very least, if the customers are wrong, they could be politely rebutted by quoting the menu prices.  E.g. instead of “fuck off” Oliver’s could say  “our menu prices show that that should cost $18, maybe there was a mistake on your receipt,  we’d encourage you to return to the store for a refund.”  etc.

There are other examples of good customer service, for example one employee comments on many posts to apologise and will often leave a phone number if the customer wants to call and complain. I do like that, however, when you’ve seen 20-30 reviews in the last few months all complaining of tired food and the response is always “I’m so sorry you deserve better” it starts to wear a bit thin. There were similar responses mid last year when I was first investigating Oliver’s too, and this anecdotally speaks to me of a business that hasn’t made changes (e.g. to freshen up the food) in response to customer concerns.

So yes, I’ve sold Oliver’s. However I recently saw an interesting negotiating tactic that suggested asking a potential partner “what would it take for you to go all in on this deal?” and I thought that would be a useful question to apply here. I do like Oliver’s, so what would it take for me to return to the company?

  • Either a new CEO or a new strategy (current strategy appears to be to roll out stores, am not sure if there is much of an internal focus on quality, staff morale, speed of service, etc)
  • Raise capital (Oliver’s hasn’t got the funds to invest in a better supply chain, for example)
  • Gut the menu and drastically simplify it (I think fresher food could be more easily delivered if it were standardised).
  • Consider if it is better to push more of the food production process out to the stores themselves (to allow for better freshness and adaptation to customer demand)
  • Determine ways in which the speed of service in the restaurants could be improved. Complaints of slowness may not reflect a wider problem, but Oliver’s does need to develop a reputation for speed, quality, and consistency if it’s to take off.
  • Get the quality and the sourcing process right.  Consider sacrificing the organic label if necessary.
  • Sharpen up social media
  • Comprehensively address (from the bottom-up, not top down) customer complaints of food freshness, cleanliness, sullen staff etc (these may not be issues, but they do need to be addressed)
  • Cut the books from the stores or at least make certain they earn their keep. I feel that they do add atmosphere to the Oliver’s brand, but there needs to be a commercial or lowest-common-denominator (e.g. simple, agenda-free, healthy food information for everybody) aspect to them. They also tie up $$ if they are not productive.
  • Abandon the full year guidance, I doubt that it will be met anyway, and consider really focusing on the operations of the business to build a good culture moving forwards. Currently I feel like Oliver’s is run according to Oliver’s vision of a healthy utopia, rather than a lowest common denominator vision of making fresh food available to everyone at the right price with good service. Which is quite a difference.
  • Cut head office and unnecessary costs. It looks as though Oliver’s may have to settle on staying smaller for a longer until it works the kinks out. That would mean it needs to cut costs productively in order to boost its cash flow and stay solvent. (Oliver’s is currently OCF positive, but it may need to invest further in staff, supply chain, etc, which could increase costs).


I don’t need to see all of those things implemented to return, but I think they’re important. I need to see proactivity, as well as either more effort or evidence of success on these fronts before returning.

You will notice that I haven’t listed ‘cheaper price’ as a possible enticement. That is because I think – and I said this in my original thesis – if Oliver’s cannot get the business proposition right, it doesn’t have a great future.

On 28 February 2018 I sold all of my 2300 Oliver’s shares at $0.235, receiving $525.55 after brokerage, for a profit of $4.60 (lol) which reflects around a 0.8% profit on the position and an immaterial impact on portfolio performance.

I have no financial interest in any company mentioned. I previously owned shares of Oliver’s but have sold them all. This is a disclosure and not a recommendation.

Sell #5: Sold Crowd Mobile

I’ve sold my stake in Crowd Mobile (ASX:CM8). The thesis broke. I wrote this piece prior to the half year result, so info from the half year was not factored into my sale decision.

Originally Crowd was priced at 5x-ish cash flow and I figured they’d have debt paid down in a ~year. Given the company’s initiatives I thought revenue would stay approximately flat and earnings roughly similar. Even if earnings declined somewhat I thought Crowd would still build company value at a reasonable rate (5x cash flow = 20% FCF yield) over the next few years.

Then there was a company-sponsored advertising spree where, if I recall correctly, Crowd advertised on Hotcopper and appeared in a few promotional websites with favourable coverage. The CEO and the company both retweeted my original buy thesis and shared it on LinkedIn. Shares went from 14 cents to 24 cents and I didn’t sell (a process error on my part).  Then the CEO sold a bunch of shares at 18 cents midway through 1H18 (September last year). From my perspective it looks as though the company pumped its share price.

My opinion is that by this point it would already have become apparent that Crowd’s first half results were weakening. I have put a little mental mark next to the CEO’s name as a result of that stunt.

According to the February confessional, revenue this half declined modestly (~5%) but EBITDA halved. Shares tanked. The thesis is broken and I’ve completely lost faith in Crowd after it pumped the stock and then the CEO sold shares in advance of a weak result. Also given the decline in EBITDA I suspect that a some of the revenue may be in the form of receivables, which had already started to blow out in the full year results last year.  I don’t think Crowd will get paid for all of its accrued revenue.

The company’s still priced at about 5x cash flow and arguably maybe I should have stuck with it, but I’ve lost faith and I chose to sell.

(Edit: The recent half year results confirm that Crowd’s priced at around 6x cash flow. The results don’t look that bad – maybe it’s a potential buy for someone at these levels, but I’m out and I won’t be back).

And to the two people that warned me about it – yeah, you were right.  I’m supposed to know better.

On 13/02/2018 I sold all of my 3450 Crowd Mobile shares at $0.078, receiving $254.15, or a loss of $261.05 on my purchase price. This is a loss of 50.6% of the investment, or 2.6% of capital.

I have no position in Crowd Mobile. This is a disclosure and not a recommendation.

Big Trouble In Big Un

I am totally staggered by this BIG situation, but I’m late to this story. Although I thought the Tipsly transaction was unusual, I didn’t pick any problems with BIG and in fact I had a hard look at its books late last year and I couldn’t see any obvious warning signs. So I did not tip off AFR, I do not have and have never had any kind of investment position in BIG, long or short.

I wrote last month that I thought Getswift (ASX: GSW) was in deep shit with the regulators. I know that several people reported them and their adviser firms to ASIC for possible breaches of the Corporations Act.  At the time I thought Getswift and it’s onetime $700m market cap were pretty ‘special’. I didn’t think I’d see anything like it again for quite some time.

Then along came Big Un Limited (ASX: BIG) which has totally blown Getswift out of the water. If Getswift was in deep shit, I think BIG is totally fucked. Totally. I think it is a zero and I think it never trades again. The latter statement is based on this little hint from the ASX:


I’ve seen maybe 30-40 suspensions at ASX’s pleasure (listing rule 17.3) but I’ve never seen those two little words. That’s the biggest clue that this is serious. You didn’t see those two words in the Getswift 17.3 suspension. Yet ASIC is inquiring here.


Even if you are still a believer in BIG, the simple fact that so much of this stuff was seemingly not released until the ASX forced them to is a huge red flag in itself, in my opinion.

Here is an abbreviated list of problems I spotted in yesterday’s announcement:

  • Response #5: Customer substitution

It appears that First Class Capital (FCC) advances cash to BRTV to fund a video. If the customer is unhappy and doesn’t pay, BRTV can substitute another customer in without penalty. This is bizarre because this (and a couple of other things, below) says to me that FCC is not incentivized to care about the credit quality of the people they sponsor. This is because BRTV appears to carry all the risk of the customer defaulting:

Response #29: At any time that a Default Event continues (and has not been remedied by BRTV) ….FC may:  …c) demand and recover any or all of the Secured Money from BRTV. 

Response #30: If a Default Event occurs, BRTV must indemnify FC against any loss resulting directly from an Offer Amount…

Although, that doesn’t completely make sense because Response #27 says “As such, BRTV does not guarantee the repayment obligations of the Customers.”

I understand that to mean that BRTV doesn’t have to repay the 12 x $1000 monthly payments for customers – it just has to repay the Offer Amount ($12000). Which isn’t much of a difference.

Response #34 says: “where BRTV simply stops using the Sponsorship Pool, FC agrees that BRTV has no further obligations in relation to contracts with customers which have been the subject of Final Acceptance by the Customer.”

Do these obligations include BRTV’s obligation to indemnify losses?  Where does the ultimate liability lie?

My confusion may be due to the pre- and post- acceptance phase from the customer. After the customer agrees to pay for the video, then collecting that seems to be FC Capital’s responsibility. Before that however, it appears to be BRTV’s issue. This is still a concern given most customers are in the pre-acceptance phase (more on this below).

So it is not certain what role FC Capital even plays – if BRTV carries all the risk, it should just extend credit to customers directly. However, that would have made its cash flows look really bad – paying the cost of creating the video up front and then only taking repayment over 12 months. BIG would also not have been able to grow revenues and cash receipts nearly so quickly.

As BRTV seems to be on the hook for repaying FC Capital, FC Capital has no real incentive to control its lending in my opinion – it can issue as much as it wants (up to $20m, subject to covenants) because BRTV will repay it and FC gets huge fees. In my opinion this is a very circular arrangement:

There has been some confusion (on my part also) whether this is a representative diagram. Here is an alternative explanation via website HotCopper that could also make sense.

I think BRTV carries virtually all of the risk, given the security over its assets as well as the fact that most customers (for which cash has been advanced) are still in the pre-approval phase. FC Capital can refuse any customers it wants (cherry picking the risks) and if that happens BIG has to either come up with another customer or refund the Offer Amount plus a 24% commission.

In my opinion this is not a sponsorship, but an extremely expensive working capital loan. There is an additional concern about this arrangement:

No business willingly gives away a 24%(!) commission to their financier while simultaneously indemnifying their financier against losses. This to me signifies that BIG is desperate and that most of the power in the arrangement rests with FC Capital. I also think this means that the BRTV business is lower quality than was otherwise apparent, because it implies an inability to seek alternative sources of finance.

It is staggering that the payment terms have not been disclosed previously (as far as I know). In this light, I think BIG’s Response #15 “SME financing is broadly used and well understood in the market” appears disingenuous. It’s factually true, but I doubt SME financing on BRTV’s precise terms is widely used, if at all.

Given that FC Capital has security over all of BRTV’s property, it looks as though BRTV is basically borrowing against its assets (at 24%p.a.) in order to extend money to customers that then comes back through the front door as revenue and cash flow. FC Capital holds onto 65% of all monies and BRTV is apparently obligated to indemnify them, so FC Capital appears pretty unlikely to have to bear any losses.

In my opinion this is a concerning arrangement and smacks of desperation. Notably this is not recorded as a loan on the balance sheet, and I think that that has the general effect of overstating BIG’s financial position, the quality of earnings, and the amount of growth that has occurred.

It also seems unusual that FC Capital is only financing 35% of receivables, since it keeps 41% as security. Many debtor finance programs will offer 50%-80% of receivables or more. In the ASX announcement (p.39, Q25 (b) ), BIG said that $19.8 million is held as Security Deposits. This compares to ‘approximately $19 million’ of the Sponsorship pool that has been used. It is not clear why ~104% of the Sponsorship Pool is held as security, given the security deposit is supposed to be only 41%. I’m not sure if I understand this correctly, but why is BIG paying 24% per annum for an arrangement where its financier appears to have more than 100% collateral?

On a different topic, hypothetically speaking, if BRTV had no real customers using the FC Capital arrangement (and I am not saying that it doesn’t) then this would be a scheme to inflate revenues and cash flow. That is why some of the media reports of customers not being aware that they have open accounts are concerning.

Description of the First Class Capital deal:

In the original announcement in Dec 2015, the wording of the FC Capital deal doesn’t really explain the true nature of the arrangement, in my opinion. It indirectly hints at debtor finance, but it doesn’t even explicitly state that it is a debtor finance arrangement (where FC Capital extends credit to BRTV based on BRTV’s receivables from customers).

The use of the word ‘sponsorship’ of customers I think is materially misleading, especially in context of the terms which make the arrangement look a lot more like a working capital loan – not debtor finance – since FC Capital appears to advance cash before a paying customer is secured (more on this below).

To me this is another big red flag as the wording has (whether intentionally or unintentionally) significantly clouded the true nature of the arrangement, in my opinion.

Response #8: Videos add value to BIG even when customers don’t pay for them.

Even when customers don’t pay for their BIG videos, these videos have ‘material long term value’ because they populate the video review platform and content library. They make BIG’s platform look ‘lived in’, I get that.  But how is BIG going to “develop strategies for using these assets to generate revenue” ?  If the customer doesn’t like the video, they wont use it.  In my opinion, it is hard to see who is going to subscribe to advertising videos of random restaurants.

Plus, given that the customer already paid for their videos, is BIG really going to ask them to pay some sort of annuity revenue for its continued use as well?  Doubt it.  Videos have a limited shelf life even when used in advertising. In my opinion, they are consumed and then after a while they are old.

Response #54, and #60 (Q.1-3):  BIG did not correctly disclose the arrangement to issue discounted shares to FC Capital.

I think this is a red flag, administrative error or not. Given the terms of the financing I describe above, the subsequent decision to issue shares to FC Capital without proper disclosure is concerning, especially given it took a year to execute the agreement (during which time the value of the shares rose manyfold).


I thought the Tipsly acquisition was pretty concerning.

  • Tipsly website registered in February 2017
  • Deal negotiated in May 2017
  • Tipsly LLC wasn’t registered until five months later on 20 October 2017 (to Tyler & Ryan O’Rear)
  • Tipsly was acquired for 3m BIG shares at $0.60 plus another $2.4m in cash and scrip
  • An additional 1.8 million (valued at over $3m at time of issue) BIG shares were paid to Thirty Three Affiliated Holdings, (of which Doug, Cydney, Tyler, & Ryan O’Rear are directors) in return for ‘services’. It’s not clear what this was for, nor what services were provided that weren’t already included in the Tipsly transaction.
  • Until very recently there were videos on Youtube (via Brandon Evertz’ YouTube account) that showed Doug O’Rear at social events with (presumably?) the BIG CEO, suggesting a social connection:
Here is the first link and the second link (videos have been removed).

The above videos were already hidden on YouTube. They were apparently embedded on the Big Review TV website using YouTube and you had to have the exact link to watch them. (They are now completely taken down).

I’ve been told that Big Un’s explanation for the timing of the LLC creation was that Tipsly was not set up for acquisition, but something about that does not sit right with me. I can’t think of a good reason why Tipsly would not already have its own LLC, especially since it was supposedly just about to launch when BIG offered them a deal.

Others have pointed out issues with the seeming quality of Tipsly’s tech:



If you look around the Tipsly site there’s certainly not much there.  I have been checking for a while and I haven’t been able to find the app in either the Android or Apple store. (I don’t have an Apple or an Android device though, so if you check today and that has changed, please let me know).

Questions from the Second Aware Letter

This part appears to show a considerable amount of churn at BRTV’s customers. There are apparently minimum conversion ratios (that didn’t seem to be specified) to prevent BIG holding on to finance forever, but they do not appear to be a high threshold.

If I understand correctly, seemingly only around 1 in 5 customers (791 out of 3,518) that is presented with a video actually accepts it (accepts the agreement to pay FC Capital):

That suggests that BRTV has to do a lot of sales activity to win replacement customers, whatever they say about their pipeline. This part is even worse:

So $18 million of last quarter’s cash flows came from FC Capital for POTENTIAL CUSTOMERS.  These are customers that have “not yet accepted a video but have not been declined…”. As we saw in the above table it looks as though only around 1 in 5 Potential Customers go on to become an Accepted Customer. This implies a significant contingent liability for BRTV in the event that it cannot find customers to replace them. To put it another way, if BRTV for some reason cannot replace customers, I think its cash flows could be something like 80% overstated (possibly even more, given that all cancellations seem to require full repayment, plus the 24% commission to FC Capital).

Another concern in my opinion is that the other $2.3 million cash receipts came from ‘pilot sponsorship programs’ in the USA. Remember how I said the FC Capital sponsorship program looks like an expensive working capital facility? I wonder if these two US sponsorship programs are established on similar terms.

If so, that would be a concern, in my opinion, because it could suggest that basically 90% of BIG’s cash receipts last quarter (There was a further $2m from general advertising) were from entities that are financing BRTV customers via BRTV basically borrowing against itself. Also, just under two thirds of BIG’s reported cash at bank is actually held in security by FC Capital.

I think it would be a grave cognitive error for an investor to attempt to rationalise or explain away this situation. If you are not concerned about the recent disclosures then, in my humble opinion, you really, really should be.

P.S. and if you got to the end of all that and you’re either a) asking WTF is going on or b) thinking that 10foot is an outrageous downramper with no grasp of what a good business looks like, ask yourself this simple question:

Why does BRTV have to borrow at 24% per annum to grow its business?

I have no, and have never had, any financial position whatsoever in any company mentioned, listed or unlisted. This is a disclosure and not a recommendation.