SA’s $50 million venture capital fund future cloudy after investment fund Blue Sky is placed in administration

The manager of the State Government’s $50 million start-up investment fund has been placed in administration, with its share price plummeting.

The future of the State Government’s $50 million venture capital fund is up in the air with manager Blue Sky Alternative Investments placed in administration.

Blue Sky won the bid to manage the South Australian Venture Capital Fund in mid-2017, and has since made investments in two companies — Myriota and Kid Sense.

The Queensland-based, ASX-listed firm has had a horror year, losing most of its value, its board, and key executives, after activist hedge fund investor Glaucus Research accused it of massively inflating its assets under management — a claim denied by Blue Sky.

Blue Sky’s shares have plunged from almost $14 in early 2018, to just 18.5c on Friday.

Blue Sky also recently told the ASX that it had breached convertible note covenants with Oaktree Capital, which has loaned it $50 million, part of which it can convert into up to 30 per cent of Blue Sky’s issued equity.

The ASX was told this morning that it had appointed KordaMentha as administrators of Blue Sky.

Under the State Government’s contract with Blue Sky, entered into under the previous Weatherill Labor Government, Blue Sky had to fulfil a number of requirements, and a Material Adverse Change Event, or change of control would constitute a trigger allowing the government to break the deal.

Elaine Stead of Blue Sky Venture Capital.

The requirements included Blue Sky producing an annual report on its activities, employing 2.4 staff based in Adelaide, and to “work actively with the local early stage innovation ecosystem to develop high-quality deal flow’’.

The Advertiser last week asked the State Government whether it was confident Blue Sky could continue to meet its obligations considering its weak financial state.

Treasurer Rob Lucas said last week the committee that oversaw the fund, chaired by Raymond Spencer, was of the view that Blue Sky was keeping its end of the bargain.

The Advertiser has been advised the Mr Lucas will make a further statement today following a Cabinet meeting this morning.

The Treasurer said last week the committee had told him that Blue Sky had evaluated “over 350 potential investment opportunities since the launch of the fund and is in various stages of due diligence with 17 opportunities. The team also continues to be actively involved in Myriota and Kid Sense, the first two investments from the fund”.

The fund requires an equal co-investment from a reputable private-sector venture capital fund investor for each investment, has a seven-year investment period and an eight-year exit period for a total of 15 years out to 2032.

Blue Sky’s Adelaide-based investment director Elaine Stead was contacted for comment last week.

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