Chapmans backs away from blockchain investment – but says it’s ‘very pleased’
Venture capitalist Chapmans is backing away from a blockchain investment less than four weeks after it concluded due diligence on the deal.
Chapmans told investors on Thursday it had cancelled the second of four payments on a $US4 million ($5.2 million) investment in US blockchain platform Securrency.
Just last month, Chapmans paid Securrency $US1 million and told investors it had “completed all legal, technical, and commercial due diligence and executed all investment documentation with Securrency”.
Part of the rationale for investing in Securrency was the company’s plan to list on the Canadian TSX Ventures Exchange by June.
Now it seems the listing has been put on the backburner.
“Chapmans has decided to not proceed with the second $US1m tranche based on Securrency’s execution plans to list on the TSX not proceeding to the satisfaction of Chapmans as at 31 March, 2018,” Chapmans said.
Nevertheless, Chapmans executive director Anthony Dunlop told investors he was “very pleased with our $US1m investment in Securrency to date”.
Mr Dunlop says he is not pulling out of the deal. Chapmans retains the right to make another two $US1 million investments on April 30 and May 31, if conditions are right.
Further payments are at Chapmans’ discretion, which Mr Dunlop says could depend on outside factors such as whether they have other deals competing for capital.
Mr Dunlop said Chapmans was excited about the listing, which he expected would have quickly repriced the business higher than the $US50 million valuation at which Chapmans entered.
“We were very very excited about coming in at one value, and then the business being listed in a pretty short period in three to four months at a significantly higher price,” he told Stockhead.
“We were really attracted to that.”
Chapmans has given up the chance of taking a board seat, which it said in March would come with the payment of the second tranche.
Changes to the deal
The listed venture capital firm signed a binding term sheet in February to invest $US4 million in the US regtech business as part of a capital raising.
They paid $500,000 and were on the hook for two more payments within 30 days of the deal completing.
But they changed the terms of the agreement in March to four tranches of $US1 million to be paid at their discretion.
“Chapmans confirms that the decision not to proceed with the second $US1m tranche will not affect the strategic channel partnership agreement,” it said, a situation where Chapmans would be able to white-label Securrency’s platform for asset and securities portfolios.
Mr Dunlop says the investment firm has plenty of cash to fund this deal and others it is considering.
Chapmans raised $2.5 million in February and $7.34 million in late March to pay for new and existing investments and $1 million.
Mr Dunlop says they haven’t allocated all of the latter funds, and also have a number of potential cashboxes to raid.
He says they’re looking at shells to backdoor list media company 20FOUR into and they have “a number” of saleable assets which could attract further investment.
He also pointed to the wealthy individuals on Chapmans register, including two Malaysian potentates, who were very supportive.
Chapmans shares are still suspended as the ASX queries a cryptocurrency mining deal the venture capitalist wants to invest in.