This is an extract from the mid-year “Management Discussion and Analysis”. You will be disappointed if you expected either a discussion or an analysis. The same report last year was also fairly brief but the year before that it was 17 pages rather than the present 4. As they say in Dutch, what the heart is full of, the mouth flows over with. Apparently the zenith in optimism has long past Duca.
Last year, Dec 31, 2014 ZBC that was capitalized at $10 mln. recorded a loss of $3.910 mln. This year, for the first 6 months it was 5.7 mln. Since inception ZBC has lost $9.61 mln. Duca’s share at 60% is roughly 5.8mln. The equity left in the joint venture is just a few hundred thousand dollars, presumable barely enough at today’s burnrate to meet payroll requirements for the remainder of the year. No problem as the former Vice Chair of Duca’s board, who is now on ZBC’s board, unelected, can call, per contract and at her pleasure, on both Duca and ZBH for additional capital infusions as needed, much like the proverbial tail wagging the dog. This is not all. Duca owns a few million dollars worth of shares in the US partner ZBH (Holdings) as an investment. Why Duca has this equity position has not been explained anywhere. Already, at last year end, a loss of 1.2 mln. had been recorded. No mention of the present value. Admin cost have been running unusually high and it is not that difficult to infer that at least 1 mln. was spent on ZBC. This is what we know, not what we do not know, but that brings us to a total of 8 mln. for Duca in just one single year.
Little information has been provided concerning the arrangement with ZBH. Our understanding is that both parties can cancel the deal after only two years. Should that happen Duca will have helped ZBH to the tune of 15 mln. or so and have little to show for it as the “brand” is not theirs. This is every investment advisors secret goal, that is to make your money and my experience into my money and your experience.
Sales are not moving along as fast as Duca would have liked. Despite all hands on deck to flog the stuff only about 1/2 of the first 1000 clients/members eligible (not by the offering memo!) for the 1% cash rebate have stepped forward. The same seems to be true for the FX services ZBC is to provide. So far not even a glimmer of hope has been presented on this score despite the two to three months that have passed since the launch. When the phone goes, just say “no thank you”.
P.S. The argument has been advanced , as is the case also in this mid-year report, that the losses are “start-up costs” and that give or take 10 mln. is not a bad price to pay for a whole new franchise that will propel Duca forward for years. However, that all this was somehow anticipated and planned does not sit well with the fact that last year’s mid-year report contains not a single reference to this adventure which had already been in the making for quite some time.
