Blue Sky explains why it poured $25m into Vinomofo

Blue Sky used the majority of $25m of ­clients’ money poured into wine business Vinomofo to buy out previous investors.

Vinomofo co-founder and co-chief executive Andre Eikmeier.

The majority of $25 million of ­clients’ money that under-siege Brisbane fund manager Blue Sky Alternative Investments poured into online wine business Vinomofo in 2016 was used to buy out previous investors, company management says.

And international contributions to Vinomofo’s bottom line are not material, despite Blue Sky managing director Rob Shand last week telling The Australian not to rely on Vinomofo’s Australian accounts because they did not include the company’s ­offshore arms.

Vinomofo was one of the investments attacked by US-based short-sellers Glaucus Research in a scathing report released more than a week ago that halved Blue Sky’s share price.

Blue Sky director Nick Dignam, who is also on the Vinomofo board, told The Australian that of the $25m tipped into the wine company, “$10m was for expansion capital and $15m for secondary purchasers from existing shareholders”.

The shareholders who sold down their stakes were private investors, not affiliated with Blue Sky, he said. “All of them sold some but retained some,” he said.

In its report, Glaucus said ­Vinomofo was “meant to be a rapidly growing flagship investment for Blue Sky”.

“Instead, Vinomofo’s latest annual report reveals a floundering business.”

Blue Sky shares closed up 5¢

It said Vinomofo “continues to burn cash at a torrid pace” and missed Blue Sky’s forecast it would earn revenue of $81.2m in the 2016-17 financial year.

Financials filed with the corporate regulator by Vinomofo’s Australian company show ­revenue of $43.7m.

Vinomofo co-founder and co-chief executive Andre Eikmeier told The Australian that “the position guessed at in the Glaucus Research on Vinomofo is inaccurate, outdated and lacks any ­insight into our then and current strategy, and our current position”.

“The $5m ‘loss’ in fiscal 2017 was a planned, aggressive growth investment,” he said. “Important to note, in relation to our current cash position, that most of the $25m raise with Blue Sky back in 2016 went to buying out earlier-stage investors, rather than capital into the business, so Glaucus’s suggestion that we’ve burned through $20-odd million is grossly mistaken.”

It is believed that management accounts use a higher figure for revenue that includes the amount of wine sold for third parties through Vinomofo’s Vino ­Direct division. This has no effect on the profit or loss line, as in management accounts the cost of the wine sold is deducted.

Last week, Mr Shand told The Australian that Vinomofo’s ­accounts covered only the Australian operation. “Vinomofo ­operates in multiple countries around the world,” he said.

Mr Shand yesterday told the market Blue Sky needed to do more to explain its business, much of which involves running funds that invest in privately held businesses that do not have publicly available valuations.