Scott Ragsdale

“You lasted a good six months into the crisis before your stock price got hammered. How are you managing the crisis? What have you learned? What is the reason, in your opinion why it went down so much? What are you plans for getting it up? I know you sold a large position of the company when you went public, are you buying back?
Your thoughts?” Voice of Reason, Singapore

The Voice of Reason is my closest friend and one of my former bosses. He is also a large investor in naseba.

This is a difficult blog to do without coming across defensive.

naseba is listed on the “small/mid size company” (MIDCAP) exchange, the marche libre of the Paris exchange – even during good times, the marche libre has very little volume (buyers and sellers).
This exchange has lost 80% of its value since the crisis hit.

Sophie and I are the main share holders in naseba, and we have two private dutch individual investors as well as a few hedgefunds and asset managers.
naseba has been listed for less than 3 years, so in the big picture we are still considered a “start up.”

On paper, in 2008 we had a great year and were on track for an even better 2009 until the crisis.

With that said…
When the crisis hit at the end Oct 2008, our business did not suddenly stop.
Some events continued to hit their targets (on paper) and we had several big weeks of written business.

HOWEVER. Written business is one thing, receiving payments from those clients is what matters.

It seemed like instantly, the world changed and clients stopped paying.
Within months, many clients either went bankrupt or could not afford to pay us; or simply canceled without paying.

When you have a company with operating cash flow budget of about 800K euro ($1.2 million) per month but only 200K euro ($350K) of payments within that month, obviously, you must eat into your surplus/cash reserves or you go belly up.

For several months, (like all companies in the world) we received very poor payments, but luckily we had cash reserves to draw upon.

Survival was our focus…
We lowered our over heads as much as possible, as quickly as possible.
We closed our Cape Town office and one of our offices in Dubai (at the time, we had 2 offices in Dubai)
We also layed off about 40% of the staff.

Our stock price didnt change for a long time because the few share holders in naseba were not selling.
To be honest, our shareholders not selling probably had little to do with their belief in naseba, but more importantly, there was no liquidity in the markets – even if they wanted to sell, no one would want to buy at a good price.

It all started to change about five months ago when a major shareholder, and mentor like friend to Sophie and I suddenly died.

He was an asset manager in Geneva, and his portfolio was liquidated after he died.

Nearly, at the same time, at least two hedgefunds who held about 10% stake in naseba both went bankrupt, and the banks which had financed these hedgefunds took over their porfolio of investments and dumped whatever investments they had on the open market to try and make whatever money back they could to cover the debt owed by the hedgefunds.

That’s when our share price dropped several euros. Crazily, the first trade which brought the share down 5 euros (about 10 million in value) was only a transaction of 83 shares. Less than 300 euro of naseba stock was sold, but it had a 10 million euro negative impact on market cap of the company.

As for your question about us buying back….

Sophie and I can not, nor can any of our family or friends legally buy stock in naseba until after our annual general meeting on Sept. 15th, but yes, as soon as we legally can, we are planning on buying back.

naseba went public with a value of about 26.5 million euro ($31m) but the nominal value of the company today is 12.1 million euro. What are we doing to get the value and share price up?

To be honest, the way investors value assets, whether the asset is a house or a company has completely changed over the past 12 months.

It will probably take us 3-5 years to get our share price back to the level it was when we first went public.

In my opinion, the only thing which matters today, at least in our industry is “profitabilty.”
Therefore, we are focused on becoming as profitable as possible while expanding within our means and diversifying our product line.

What have I learned?

It is difficult question because we have learned so much.

In 2008, the company was pluggin away, and our year was very successful on paper. However, upon reflection, the company had become fat and we wasted money on staff travel, investments, JVs, certain expensive salaries, computers, etc.

Since the crisis, the company has become much more lean and focused.
Every euro spent is double, triple checked to see if its necessary.
The crisis also forced us to make our products better and our overall sales process more efficient.

The company is much better managed and run today than ever before.

When times get tough you get to see who is really with you, and who is not.

naseba survived the storm because of the hard work, dedication and dynamicism of many many great employees… (I am truly grateful to everyone).

LP for example, had a $83,000 commission claim in the month of November 2008, but due to the crisis and cash flow concerns, I asked him if we could break up his commission payments, and delay it over a few months. He agreed and even went as far as telling me not to pay him anything until the business picked back up…
In the end LP received his full commission. We paid him 1,000 euro extra as a token of our appreciation.

Three producers also broke up large commission payments over a few months to help the company with cash flow — each producer got paid 500 euro bonus as a token of our appreciation.

My thoughts?
I think it will take another 18 months or so until the world begins to truly turn around.
naseba will continue to focus on producing great product for the emerging markets, as well as expand our financial information service division and Ambitionlife — with our main focus on developing the company into a large profit making machine.

We climbed very high, very quickly up the proverbial mountain, but due to forces beyond our control we fell down, far below from where we had climbed.

Instead of focusing on the negatives, or how unfair things were, we learned from the fall, got back up and keep climbing…

I once read a chinese proverb that went something like this:
it wasnt until my house burned down did I see the stars most clearly