Apparel brand Vulpine went into administration in May. BikeBiz has since been covering the story in depth, with an article headlined "What the hell happened at Vulpine?" revealing some of the background to this sorry tale. More recently the brand’s assets were bought by Mango Bikes. The financial details of this transaction were not revealed at the time, but it has now come to light that Vulpine’s £250,000-worth of stock was bought for £70,000.
This detail was revealed in a report compiled by RSM of London, the insolvency practitioners appointed to oversee Vulpine’s administration. BikeBiz has been sent a copy of this report, which was posted at the weekend to Vulpine’s 600+ shareholders. The report confirms that shareholders can whistle for their cash – the prospect of securing any funds for the investors is "nil".
RSM was introduced to Vulpine on 26th April, and formally appointed on 4th May. The company was put into administration on 5th May. Three days later sale-information packs were provided to more than sixty interested parties.
However, there was little interest in acquiring the business as a going concern because of the "company’s financial commitments and the impending working capital requirement for stock,” said RSM’s report. Instead, a sale of assets was agreed by 26th May. The book value of the assets – mainly stock of clothing – was £250,000, but the warehouse facility would not release these goods until it was paid £35,000 to partially settle its account with Vulpine, with further sums to be paid later on by the eventual purchaser (the warehouse was owed £56,000).
There were no bids at the book price, with some for £100,000 but most for below £50,000. Mango Bikes eventually bought the assets on 23rd May for £70,000 (a revenue share scheme was also put in place).
Vulpine co-founder and MD Nick Hussey told BikeBiz: “I’m glad that Mango Bikes will continue the brand that I created. I’m helping them get to know Vulpine in depth. They’re good people who care about the brand and its customers, and I hope their business thrives."
Vulpine’s 600+ shareholders were enticed into investing via crowdfunding on Crowdcube. One investor sunk £50,000 into the company although most invested just a few hundred pounds. None will get any money back. (Nick Hussey is listed as being the company’s largest shareholder.)
HSBC was owed £96,882. Nine employees will get a maximum of £800 each for unpaid wages. Unsecured creditors – including the shareholders – are owed £113,768.
Hussey told the administrators that the goal for the company from the outset had been to “build the brand as fast as possible, with an exit by trade sale after 5 years.”
Hussey believed the brand to be the company’s “most valuable asset for the best trade sale” but some of the six directors appointed to the board disagreed and stressed that “turning a profit as soon as possible should be the key strategic goal.” This would be actioned by cost cutting and a greater concentration on wholesale sales.
Revenue in Vulpine’s first year had been £200,000; in the second year it was £416,000. In the company’s third year turnover doubled to £993,000 thanks to increased web sales and due to a licensing deal signed with Sir Chris Hoy, with sales exclusively via Evans Cycles.
Crowdfunding through Crowdcube took place in Autumn 2015, with £1m raised in 14 days. However, despite the cash injection, all was not well at Vulpine. There were disagreements about strategy on the Vulpine board (the appointment of a new MD didn’t help) and there was “reduced morale across the team,” said Hussey’s report to the administrators. “The expected sales from Hoy Vulpine did not materialise,” he added, “although the associated cost base remained in place.” Results in year four were adversely impacted by “depressed sales, increased management costs, a lack of clarity and high staff turnover,” said Hussey.
The company had revenue of £717,000 in its fourth year, 2015-2016, but continued to be loss-making. In May 2016, “following intense discussion and analysis”, said Hussey, all members of the board, except Hussey, resigned. The departing board members did not believe Hussey’s sales targets were “sensible.” The partnership with Hoy was halted and Vulpine went back to being an online-only seller.
“Brexit had a clear impact,” claimed Hussey, “with adverse USD and Euro currency fluctuations increasing stock costs by £100,000.” It became clear that Vulpine needed more money to ride out the seasonality of apparel sales – Hussey felt this would come through “potential institutional investors or crowdfunding.”
Hussey reported that he “became aware of cashflow issues in March  when it became clear that most Spring/Summer stock would not arrive on time.” However, a “critical cash situation was months away at this point”, believed Hussey. This confidence quickly dissipated and “the search for investment” was “brought forward by three months,” Hussey told the administrators.
“There was confidence in the marketplace due to Vulpine’s track record in crowdfunding,” believed Hussey, adding that a “tight timeframe meant that crowdfunding was pursued as a priority.”
Shareholders were not informed of the company’s perilous cashflow problems because, said Hussey, “contacting nearly 600 investors would be essentially making the news public and this would have had a negative effect on potential investor and customer confidence and would have been too great a distraction from raising funds on a positive platform.”
(Had the shareholders been told their investments were at risk it’s possible they might have been able to take action before losing every penny.)
Hussey went back to Crowdcube at Easter this year order to raise more money, including from small investors. However, “investor traffic seemed to drop dramatically over the Easter period” – and faced with a lacklustre funding-round Hussey decided to pull the campaign in order to “reallocate resources on gaining institutional investment.” Fearing the worst, it was at this point that Hussey took “in-depth legal and professional advice about insolvency.”
Even though he told investors that Vulpine would break even in 2018 his attempt to gain institutional investment came to nought. In May he “no longer had confidence that raising investment … was possible.” The vultures were now circling, with Hussey surmising they were “now holding off for administration as this could present them with a better opportunity to acquire Vulpine.”
The decision was made to put the company into administration.
In 2016, according to the administrator’s report, directors’ renumeration was £126,114. In the 11 months to March 2017 – when Hussey was the sole director – it was £95,969. However, this paints an inaccurate picture, Hussey told BikeBiz. “The short lived managing director was employed until end of June 2016 and his salary, and payoff included in the last financial year. This will explain the higher number. There were further directors paid in the previous financial year, so this total would be higher, in the previous financial year, than the last.” In other words, the seemingly high director’s pay is for a number of directors, not just Hussey.
For the “What the hell happened at Vulpine?” article BikeBiz spent the best part of an hour talking to Hussey but, because of the ongoing administration, none of his actual words could be used in the piece. He is now freer to talk. He told BikeBiz: "It’s a difficult time, but high-growth businesses have higher risks, and you have to go into that as an entrepreneur with your eyes open. Though there was overwhelming support and sympathy from shareholders, I was not surprised to receive criticism from some stakeholders. That is the nature of a managing director’s responsibility.
“I’m devastated that we failed and that people I care about were affected, but I know that everyone tried their best. The sensationalist conclusions made by a few on the internet were disappointing when I knew we’d done the right thing, morally and professionally.”