European High Growth Opportunities Securitization Fund (“EHGO”), an institutional investment company based in Luxembourg, has expressed significant concerns about arrangements made by the departed executive directors of Iconic Labs plc (“Iconic”) with Greencastle Capital (“Greencastle”), a company established by the former Executive Chairman of Iconic, David Sefton.
John Quinlan, Liam Harrington and Sam Asante resigned from Iconic on 31 January 2021, with Iconic also announcing it had received notices of termination of the management service agreements between the company and Greencastle Capital in respect of the JOE Media and TheLondonEconomic businesses.
Greencastle Capital then announced that the former Iconic directors had joined them. Iconic had previously lent Greenlight Capital the £1m required to purchase JOE Media, having received the money in financing from EHGO.
In a statement, EHGO said: “The timing and sequencing of the activity by these three departed directors of Iconic raises serious questions, to say the least. Especially as Greencastle is a vehicle established (and owned) by David Sefton, the former Executive Chairman of Iconic. EHGO provided Iconic with £1m in financing, which Iconic then lent to Greencastle to buy JOE Media. The directors of Iconic then refused to honour our financing agreement, forcing us to take legal action against Iconic. The directors then departed for Greencastle, leaving Iconic holding the outstanding debt and pending proceedings, with Greencastle holding JOE Media (the acquisition of which was financed by Iconic) Greencastle then cancelled its service agreement with Iconic (thereby depriving Iconic of any benefit from the JOE Media acquisition).
“We are gravely concerned about these moves. Iconic had been protected in its arrangements with Greencastle through a conversion right whereby it would have the right to equity (shares) in Greencastle by converting the debt. However, on December 7th last year, Iconic announced that it had amended its agreement with Greencastle in order to do away with the conversion right in respect of Greencastle shares. Such an equity conversion right was central to the business rationale of the Greencastle/JOE Media structure, as it meant that Iconic could come in at any time and become a direct equity owner in Greencastle. We note that the amendment of the agreement to do away with the equity conversion right with Greencastle followed less than two business days after EHGO’s presented revised settlement terms to the Iconic board detailing terms on which it would be willing to settle its claim with Iconic. It would seem that the only parties who benefited from the amendments to the Greencastle agreement announced on December 7th of last year were David Sefton, and now that they have left, John Quinlan, Liam Harrington and Sam Asante (who were members of the board of Iconic at the time they made the decision to amend the Greencastle agreement).
“These moves therefore appear to us to have been pre-planned in order to give the directors a lifeboat on which to jump ship to Greencastle and raise significant concerns about the directors’ compliance with their fiduciary duties as directors of Iconic.
“This follows their stewardship of Iconic in which they presided over huge value destruction for shareholders and a collapse in the share price of the company, leaving the company in an almost valueless state with significant debts owed to its creditors. This whole episode raises major questions about their conduct and the conduct of David Sefton, questions which we expect they will now be required to answer, whether in court or by the appropriate regulatory authorities.”
Notes to editors
About European High Growth Opportunities Securitization Fund
European High Growth Opportunities Securitization Fund is an institutional investment company based in Luxembourg which focuses on financing innovative companies globally that are deemed to be significantly undervalued.
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