Concerned Shareholder Sends an Open Letter to Real Luck Shareholders, Calling for Immediate End to Value Destruction
Shareholder Adam Arviv urges fellow shareholders to voice their opinion on Real Luck's negative performance and lack of progress
TORONTO, Oct. 24, 2022 /CNW/ - Activist investor Adam Arviv released an open letter to fellow shareholders of Real Luck Group Ltd ("Real Luck") today:
Dear Shareholders of Real Luck Group Ltd,
Like all of you, we have major concerns with Real Luck's business plan and are convinced that the company is on a path to bankruptcy. We have shared these concerns directly with Real Luck CEO Thomas Rosander but have not received a response. We are concerned that Real Luck's management and the Board of Directors are not fulfilling their fiduciary duty to act in the best interest of shareholders.
We do not believe that the shareholders have been given all the facts and based on Real Luck's recent interim financial statements, we have uncovered the following:
- Despite having spent nearly $1.5MM on marketing and advertising in the last 18 months there has been less than $40,000 in revenue generated. How can this be a viable business model?
- Even more concerning is the fact that the nominal amount of revenue generated was achieved at a steeply negative gross profit margin, due to payments to third parties ? with a cost of sales more than four times the actual revenue generated. This raises serious doubts as to the commercial viability and scalability of the business model.
- The Company continues to engage in unconstrained spending, despite a lack of any meaningful results, with a cash burn of consistently more than $600,000 per month. Shockingly, management continues to reward itself for this value destruction and has issued more than 1.3 million in options in the first half of the year.
- This is particularly concerning given the significant turnover at the executive and Board level over the past 12 months, including the resignation of both the former CEO and CFO and at least one Director. The current management team does not own any common stock in the Company, indicating a total lack of conviction in the future success of Real Luck. Why don't the CEO and CFO each write a cheque for $1M into a private round to demonstrate their commitment to the business plan?
- The Company has had adequate time (more than 18 months) to demonstrate the viability of its business model, but has not demonstrated any tangible progress or results, despite several million dollars in investment.
Our team is very familiar with the gaming operator landscape in Canada and would not typically invest in such a small company but has recently begun to consider acquiring companies with a direct interest in the gaming sector and which have strong balance sheets.
We have accumulated a position in Real Luck and sent a proposal to its Board of Directors more than six weeks ago to review strategic alternatives for the company which has been ignored. Any delay in action is detrimental to the shareholders of Real Luck.
The only other feasible option for Real Luck is to immediately wind down all operations and engage in a sale process of the Company, returning all cash to investors to avoid incremental value destruction. Every month wasted costs shareholders more than $600,000.
We have proposed a viable path forward for Real Luck, yet haven't received any response from the company. This is a direct breach of the company's fiduciary obligations to its shareholders. As fellow shareholders we want to see our investment grow, rather than destroyed, and we urge all shareholders to voice their opinion strongly to Real Luck's management and Board of Directors.
Adam Arviv
KAOS Capital
SOURCE KAOS Capital
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