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3m shares in The Marketing Group have gone missing, founder claims

The co-founder of troubled Singapore-based holding company The Marketing Group has claimed a significant number of company shares have been taken by a lender and sold without permission.

In a tweet posted on April 13, Jeremy Harbour claimed the holding company had placed three million shares with a lender based in the US as a security deposit on a €16 million (S$24m) loan. The shares constitute just over 8% of the 31m shares currently in circulation.

Harbour, who founded TMG with partner Callum Laing through their Singapore-based private equity firm Unity Group, said the tweeted statement was intended to explain the public company’s plummeting share price over the last few months.

Shares in the publicly listed group of 17 small agencies are currently sitting at €1.16, down from a high of €9 last August.

Singapore agencies make up the biggest part of the company. Of TMG’s revenues, 39% come from Singapore, 32% from Australia and New Zealand; 15% from North America and 14% from Europe. Its Singapore agencies include Black Marketing, Creative Insurgence, One9Ninety,

Harbour was replaced as chairman and left the board of The Marketing Group on Friday. New director Don Elgie, who is Australia-based, has become the company’s new chairman.

Harbour claimed he was posting the statement as a shareholder, not as a spokesman for the company. He owns about 2% of the company’s shares. According to his post, the company is now set to take a costly legal case against the as-of-yet unnamed principal lender, who is based in the United States.

The statement can be seen below:

In the statement, Harbour told fellow shareholders that after the Sweden-listed holding company launched, it needed more funds, which he said would be used to seal deals when companies being acquired were not willing to accept shares in The Marketing Group.

He wrote: “As we worked on growing the business is became apparent that incorporating a cash component into transactions would be beneficial to building and protecting shareholder value.”

The TMG’s first annual report, published on February 28, reveals that the parent company finished its first financial year with current liabilities for the next 12 months of €4.5m. But it had just €45,000 in cash or cash equivalents in the bank.

Elsewhere in the accounts, that the wider group’s current liabilities including deferred consideration – which presumably consists of payments due to owners of agencies which joined the group – amount to €11.5m. Cash and cash equivalents amount to just €2.4m. The company has a further €500,000 (S$750,000) outstanding to a later date.

In his statement, Harbour suggested that the attempt to raise funds had gone badly wrong.

Arguing that the intention of the fund-raising was to make further acquisitions, Harbour wrote: “We decided to securitise some of our holdings in TMG in order to access external funding.

“ We explored this proposition with several lenders and finally entered into an agreement with a lender that operated in Washington, Hong Kong and Switzerland.

“The understanding was for the lender to provide a total funding of €16m – to be disbursed in several tranches. We pledged approximately three million shares with them as security for the first tranche which was supposed to be €5m.”

According to Harbour, share register company Euroclear told TMG that the number of shares being held by the lender had dropped. He said the lender claimed they were still held within its other financial institutions.

The lender then claimed, Harbour said, that somebody else was short selling the shares. Short selling occurs when a trader effectively gambles that a share price will go down in the future. Harbour said this claim could not be substantiated.

He added: “The lender only delivered approximately €2.2m of the agreed loan amount… we found out that they ultimately sold all three million pledged shares.

“We are building a full legal case. We have been warned by our lawyers this is a slow and expensive process.”

TMG has courted controversy since it first floated on a Swedish alternative stock exchange on June 9 last year. Positioning itself as a decentralised alternative to the traditional agency holding group model, the company’s share price inexplicably skyrocketed from €1.23 (S$1.80) to a high of €9 (S$13.3) two months after floating. Since then, the price has dropped to €1.18 (S$1.80) at the time of publication, making it worth nearly a tenth of its peak market capitalisation.

Mumbrella Asia has contacted Harbour for further clarification of his online comments, but received no response at the time of publication. TMG declined to comment.

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