The corporate regulator is investigating an Australian company that left staff “shocked” when it collapsed and owed $32m.
The company went bankrupt in July and a recent administrator’s report alleged that the startup could have been operating while it was insolvent and its sole director took out a $7.7m loan from the firm to buy luxury properties.
The report by administrators Cathro Partners, which was filed with the Australian Securities and Investments Commission, alleged that the company was suspected of trading while insolvent for a “significant period of time” but said further investigations were needed.
He noted that the company may have been insolvent since at least November 14 last year, when its CEO and sole director signed a $7.7 million loan as lender and borrower to “complete a personal property agreement.”
The sole director had repaid some of the money, but still owed $4.76 million, plus interest, according to the report.
“During the year prior to our appointment, Metigy raised capital in excess of $20 million from various investors which appears to have been used to service the day-to-day business requirements of the group entities and a loan to the director which was used to purchase assets from personal property,” the manager’s report said.
$4188 accumulating one day
The director’s properties include a six-bedroom, five-bathroom house in Mosman, on Sydney’s lower north shore, bought for $10.5 million in September last year, and a property on the south coast of New South Wales. with pool and tennis court, purchased for $7.7 million in November.
Both have been frozen by administrators.
But due to falling property prices this year, managers believed the properties were now worth less than their original purchase prices, with the report estimating there was about $3.7 million in equity in the two houses.
“We note that mortgages are currently in default and that the secured creditor, Pallas Capital, has now taken steps to foreclose on these properties by appointing in-possession mortgagees,” the report says.
“We have notified Pallas Capital that they will sell the properties as quickly as possible to the benefit of creditors as default interest accrues at a rate of $4,188 per day.”
The corporate regulator, ASIC, revealed that it was investigating the collapse of the company.
“ASIC has launched an investigation into the circumstances of the Metigy collapse and the issues identified by the administrators in their report,” a spokeswoman said.
“ASIC will not comment further on its investigation.”
Employees owed $2.5 million
Metigy’s demise, in which 75 staff members immediately lost their jobs, left many “shocked”.
The report also revealed that the employees were owed about $2.5 million in outstanding entitlements.
A member of staff, who had been with the company for just four months before it collapsed, claimed that he did not receive his last month’s pay.
He said finding out he had lost his job three weeks ago while on vacation had been “hard”.
“I’m sad. And overwhelmed. It’s overwhelming when you and all your colleagues lose their jobs,” he wrote on LinkedIn.
“It’s also overwhelming when you realize you weren’t paid last month either. And that I probably won’t get paid for the next few months because I’ll have to go through the interview process, get a job, work a month and finally get that paycheck (sic).”
what went wrong
Metigy had planned to raise money at a $1 billion valuation earlier this year as it offered an AI platform that provided customer insights for small business marketing.
But administrators said a number of factors led to the company’s collapse, including “poor strategic management,” “under capitalization and inability to raise additional capital,” “inadequate cash flow or high use of cash,” “trading losses.” ” and “unreasonable management”. related transactions,” his report says.
It showed start-up costs skyrocketing to $10 million in fiscal 2022, and it made $61,120 in sales in the year to June 30 and $17,299 the year before.
The administrators have recommended that the company be put into liquidation.
Tech companies are struggling in Australia after a stock market bloodbath, which has spooked investors and made it harder to find funding.
Other failed businesses include grocery delivery service Send, which was liquidated at the end of May after the company spent $11 million over eight months to stay afloat.
A Melbourne-based esports company called Order, which raised $5.3 million in funding last year, also collapsed earlier this month.