Investors to lose £650,000 as Leeds firm Awesome Merchandise goes into controversial administration
Awesome Merchandise Ltd provided services to business and individual consumers across the music industry, creatives and power users of print via its e-commerce platform.
The firm had previously raised £654,000 from 1,064 investors via a crowd-funding investment platform website called Crowdcube.
The company was placed into administration on Wednesday and was immediately sold to a newly-established business called Print.Inc Group Ltd, whose only director is Luke Hodson - the man who founded Awesome Merchandise in 2009.
Awesome Merchandise’s business and assets have been sold to Print.inc Group Limited. Administrators said all 94 employees located at the company’s head office in Leeds will move across as part of the sale.
A statement by administrators Interpath Advisory said the decision to put Awesome Merchandise into administration was due to the business, which is dependent on the live music and events sector, facing a “difficult trading environment” as a result of the pandemic and associated lockdown measures.
Mr Hodson wrote on Crowdcube that the decision will “allow the factory to remain open and for customer orders to be fulfilled”.
But he admitted that Crowdcube investors will lose out.
“I am deeply sorry that I was not able to carry Awesome Merchandise LTD and its investment from the Crowdcube community to a successful exit or return on investment,” he said.
“Many investors big and small are close friends and family. Many others are long term customers, partners and suppliers.
“Awesome Merchandise LTD has been the almost sole focus of my life for 17 years. There are a lot of factors that contributed to the administration and a more detailed report will be made by the administrators.”
When challenged by a number of unhappy investors on the platform, Mr Hodson published a follow-up post.
He wrote: “Despite what is being said, I didn’t simply ‘buy back’ the company with my own funds.
“Over the years, other than the Crowdcube raise, nearly everything generated by Awesome has been re-invested into the business.
“The UK business in reality saw virtually £0 of the Crowdcube raise because it was profitable and self sustaining pre-pandemic.
“The funding for the new company came externally from family, after every other avenue had been exhausted. I am extremely grateful that my family helped at the last minute to give a chance for me to continue working in an area I am passionate about and I believe I have helped benefit the UK print and creative markets on the whole. The belief my family has shown, ultimately has helped to save over 90 people’s jobs.
“Three weeks ago today I was in the position where I needed to liquidate the business completely.
“The deal that has been done had to go through a lot of diligence and external auditing, it met the requirements set out by law. This was the last type of deal or option left open.”
Darren Di Lieto is founder and creative director of Hireillo - a company which represents around 500 professional illustrators and which invested £500 in Awesome Merchandise via Crowdcube in 2018.
He said that having had been a customer of Awesome Merchandise previously, he felt it was a positive investment to help the firm with its stated plan to expand into America.
Mr Di Lieto said it had become apparent a week ago that there were issues with the business when an illustrator he knew highlighted someone complaining on Instagram about not receiving a refund.
He said subsequent checks of recent online reviews confirmed there was a “major issue”.
Mr Di Lieto said he was unhappy to hear that Mr Hodson was the owner of the new business that was taking over Awesome Merchandise’s assets from administration.
“It feels like we as investors and shareholders are being ripped off without the founder having almost any consequence for the failed business,” he said.
“The investors will have not been people looking to make money - it is primarily people who are illustrators who believed in the brand. It will have been mainly illustrators and artists who are part of the same community.”
A spokesperson for administrators Interpath Advisory said: “Legal ownership of the new entity can be viewed online at Companies House. Following an extensive marketing process, this course of action presented a better outcome for creditors (compared to a liquidation scenario which would be the likely alternative).”
The spokesperson confirmed that Crowdcube investors will not be listed as creditors as part of the administration process - meaning they will not receive any money.
“Crowdcube funders as equity investors will not form part of the unsecured creditors.”
When asked whether Mr Hodson stands by his actions, the spokesperson said: “We are not advising Mr Hodson personally.”
In an initial press release, Nick Holloway, Managing Director at Interpath Advisory and Joint Administrator, said: “We are pleased to have agreed this transaction which ensures continuity of service for Awesome Merchandise’s customers and importantly, safeguards a number of jobs.”
Howard Smith, Managing Director at Interpath Advisory and Joint Administrator, added: “Awesome Merchandise is a bespoke business with strong B2B relationships across the music industry which, unfortunately, like many other companies, experienced significant financial challenges as a result of Covid-19. We’re delighted to have completed this transaction which secures the future of the business, as well as safeguarding the jobs of 94 employees working out of the Head Office in Leeds.”
There was no response when The Yorkshire Post attempted to contact the offices of Awesome Merchandise.
Crowdcube has been contacted for comment.