Getting control of an ASX company is the holy grail for an entrepreneur; it means deep pools of other people’s capital to capitalise upon. So it is that colourful tech venturer, Giuseppe Porcelli of Lakeba Group is having his second tilt at The Boards. Michael West reports.
Will colourful Manly entrepreneur Giuseppe Porcelli of Lakeba Group fame finally get to control a public company listed on the ASX through the back door?
Porcelli is no stranger to creative accounting. He somehow managed to convert a simple offshore software development business generating very little cash into an investment behemoth with “revenues” of $100m. That is if you believe the “independent valuations” that he has yet to disclose to anyone, even shareholders.
Many even doubt that investing in businesses you control actually qualifies for this special accounting categorisation as an investment company. After being questioned at Lakeba’s AGM in 2022, the original auditor, ASK Accounting, saw discretion as the better part of valour and soon resigned. This left the door open for PKF, a mid-tier accounting firm, to be appointed as the new auditor. The result? A dramatic revaluation of Lakeba’s investments. Downwards, of course.
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This gives some insight into Porcelli’s apparent need to be seen as a big immigrant success story at any cost. He craves publicity as much as others crave tiramisu. His ultimate goal seems to be to head up a company listed on a public stock exchange, any public stock exchange, regardless of whether that is the best option for shareholders.
Some years ago, Porcelli stage-managed an attempt by Lakeba, his then relatively unknown private business, to take control of Mobecom Ltd (now Gratifii Ltd), a flailing public company in the loyalty program business. His cunning plan was to sell Mobecom, one of Lakeba’s early-stage ventures called Paid by Coins, and build some tech in exchange for a LOT of Mobecom shares.
An extraordinary number given the very early stage of Paid by Coins and its relatively minuscule revenues. So extraordinary, that the deal was eventually unwound completely as being contrary to the best interests of Mobecom shareholders. This was in no small part due to the concerns of the then incoming Mobecom CEO, Iain Dunstan, who clearly did not see the same value in Paid by Coins as was claimed by Porcelli and the previous CEO of Mobecom that was replaced by Dunstan. Deal dead. Strike 1.
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Interestingly, even though this crafty deal was unwound before it was fully consummated, Porcelli still claims it as an exit on his Lakeba website in an apparent attempt to show a semblance of success in his 10-year-old “venture creation” business. In line with its tag line, Lakeba has done plenty of “Conceiving”, a bunch of “Creating” but not so much “Commercialising”.
The reality, according to several long suffering shareholders, is that there has been no return whatsoever on their investment despite regular promises from Porcelli that “this will be our year”. Promises that are now as thin as the finest Italian prosciutto. It seems that the hefty revenues previously claimed by Lakeba as the result of startlingly opaque increases in the valuations of its ventures have not converted to any actual returns. Like oral contracts, paper returns aren’t worth the paper they are written on.
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The Mobecom fiasco has also led to some good old-fashioned litigation by several shareholders of Lakeba who claim they were misled regarding Lakeba’s revenues when investing back in 2019. Apart from the distraction and expense of litigation, a successful outcome for the shareholders could lead to others making similar claims against Lakeba.
In any case, following the Mobecom “deal”, Porcelli tried a new tack. Build a digital bank by acquiring a tiny credit union that already had the banking licences required. A new Lakeba venture, Ezi Financial Services Pty Ltd, was set up, and capital was raised at a lofty valuation to build the tech and buy the licence.
Other more qualified organisations with much deeper pockets had also tried to launch a digital bank and failed, but Porcelli pitched that he had the secret sauce that could pull off this minor miracle.
Unfortunately for the investors, the deal with Maleny Credit Union also fell apart relatively quickly despite the loud trumpeting of Lakeba’s supposed ability to build the underlying technology required to turn a quaint one-branch credit union into a world-class digital bank. The result? The Maleny Board lost faith in Porcelli’s abilities and pulled the pin. Strike 2.
Go forward a few years, and here we are again. A recent announcement from another public company, Domacom Ltd, indicates that they are in discussions with Lakeba to acquire Bricklet, another one of its controlled ventures. Bricklet has promised to change the property market by letting people buy fractions of properties, wineries, farms, anything, but it seems the market is still somewhat dubious about it all.
Like the old timeshare model, it’s easy to buy but hard to sell when you want to cash out. Not to say the fractional model doesn’t have a place, just that it has proven hard to convince people it is the best place to park their hard-earned dollars.
Domacom is in the same market, and looking at its share price, it seems to be having a similar problem getting punters to buy into the concept. It has a current market cap of just $4.8m with a share price that has dropped 83% in the last year to just 0.011c. So who is saving who? Or are they both clinging to a one-man life-raft?
So what’s the proposed deal? Well, it looks like Bricklet will lend a chunk of cash to Domacom to solve its current cashflow problems, then invest in Domacom, following which Domacom will “consider” buying Bricklet.
Given the very early stage of this deal, details are scant. However, you can bet London to a Brick(let) that the acquisition will be via a share swap so that control of Domacom will shift to Lakeba. That’s the Porcelli Way. It is looking unlikely to be a cash acquisition, given Domacom is proposing to borrow money from Bricklet to pay its debts. It’s looking more like a cheap back-door listing, just like the failed attempt on Mobecom.
Whether this deal goes ahead depends on double due diligence. First, Bricklet has to check out Domacom before lending it money, and then Domacom has to check out Bricklet to see if it wants to buy it. We await the result with bated breath, as do the Lakeba shareholders, who are no doubt hoping for some sort of liquidity event after all this time.
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Bricklet has had its own share of problems. A recent attempt to partner up with a business packaging up farms for sale as “bricklets” on the Bricklet platform. “We just needed a platform to manage the process,” said Brian Sher of The Family Farm.
“Bricklet seemed like the answer, but … we think their legal documentation made the model totally unworkable for farms, so we pulled out of the deal”.
Sher had other concerns about the way Bricklet was being managed. “We got charged all sorts of fees, including stamp duty, even though they were not properly disclosed. We totally lost faith in the platform and its management.“
Will the due diligence of Bricklet’s business yield a positive outcome? Let’s hope Domacom’s advisors don’t subscribe to MWM and find out about all the other dodgy dealings at Bricklet that have been reported to us (). If so, it may be strike 3 for Porcelli… Watch this space.
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Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.