£1.2m crowdfunders reassured after being left in dark over Jersey Hemp sale

Monday 18 July 2022

Crowdfunders frustrated about being kept in the dark when Jersey Hemp was sold earlier this year have been reassured they’ll be left in a better position if a “generous” offer by the new parent company is accepted.

The hemp and CBD oil producer was sold by parent company Calyx Ltd to Seaforth Organic Limited in April – but this was not communicated at the time to the 629 Seedrs investors who had together raised more than £1.2m for the business.

It was only last week that investors were told of the sale by the Seedrs crowdfunding team, and that their shares for the time being were worth £0.

The news led to unease and disappointment and frustration among many - some of whom took to Seedrs' discussion boards to air their frustration and even suggest that they wished to take legal action.

However, Calyx Director Bruce Casely has since claimed that Seedrs' update was open to "misinterpretation" and reassured investors that they were being made a share offer that would leave them in a "better position than they were formerly in."

Video: A promotional video for Jersey Hemp, which organic and sustainable farming methods to produce its products.

Jersey Hemp secured investment of more than £1.2m from more than 600 investors after launching a fundraising drive on investment platform Seedrs in August 2021. The intention was to help it grow its operations through investment in its team and marketing.

Investors who had put in more than £50 were promised perks such as a 10ml 500mg bottle of CBD oil.

After several months without hearing from the company, and with many not having received their 'perks', investors received an update email from Seedrs last Tuesday (12 July) informing them that it had taken the decision to mark the company's share price to £0.

It explained that this was because Calyx Ltd – trading as Jersey Hemp – had only made the crowdfunding platform aware in June that its Chair had resigned in January and that Calyx had sold Jersey Hemp's assets to Jersey-registered Seaforth Ltd on 13 April for £100,000.

It said that Seaforth had offered to issue equivalent shares to allow Seedrs investors to "continue to have an interest in the business", and that it was "currently liaising with Seaforth to have a better understanding of this offer."

Alongside its email, Seedrs shared correspondence from Calyx Director Bruce Casely to a Seedrs portfolio manager, which explained why the sale had been necessary.

"During summer 2021, the IPO market for CBD based companies cooled and it was clear that an IPO was not going to provide the quick exit some of the existing shareholders had envisaged," he explained. "However, there was still considerable interest from a number of high net worth individuals and indeed, a number of small investors (ranging from 25k to £300k) who came on board, the final one investing in November 2021."

He went on to state that the Seedrs process was "quite protracted", with funds not released until 28 December 2021.

One week later, Mr Casely explained that Calyx held a "standard quarterly board meeting", but that this "turned out to be a big inflection point... for the aspirations of the business."

"The chairman was viewed as an anchor investor alongside whom other investors could invest. He held about 80% of a £1.65m loan note, which ranked above all ordinary shareholders. He and his business colleagues also owned a number of shares. It was acknowledged that the business would require further funding to enable it to reach self-sufficiency and the board had assumed that the chairman would anchor such any investment round," Mr Casely wrote.

However, Mr Casely said this idea was "dismissed... as he had grown impatient with his investment and lack of imminent exit" and he subsequently resigned on 26 January.

In his letter, Mr Casely said that he sent out a shareholder update on 29 January to all shareholders "advising them of the strategic intent of the business, achievements thus far and of the pressing need to raise further funding." However, Seedrs shareholders last week told Express that none had been received.

The outstanding loan note, he said, was a "stumbling block" and the business struggled to find individuals "prepared to invest in the existing structure."

However, in March 2022 a deal was struck with one group of investors who eventually purchased the assets of Calyx – i.e. the Jersey Hemp business – via a newly incorporated company called Seaforth Organic Limited.

As part of the sale, the £1.6m secured loan note was assigned to Seaforth, repayable upon upon an exit if the company reaches a £15m valuation.

The day after Seedrs' update, Mr Casely shared a statement with investors claiming that the crowdfunding platform had not given a "fully rounded statement of the facts" and was therefore "open to potential misinterpretation."

Moving to reassure Seedrs investors, he described the Seaforth offer as "generous" and was clear that their interest in the business was "not diluted as a result of the change in ownership."

"The terms are, of course, critical and are non-dilutive to the Seedrs investors who end up in a better position than they were formerly in," Mr Casely continued.

"We are not sure why Seedrs did not communicate the full details of this offer to their investors sooner but understand that Seedrs felt unable to communicate the terms of this offer to the Seedrs investors until it has completed due diligence."

Mr Casely maintained that the the Seedrs crowdfunding was done "in good faith, as part of wider fundraising" and reassured investors that all money "(new of the usual finance and legal costs) were invested in Jersey Hemp, which is now a subsidiary in Seaforth."

Further highlighting the difficult market picture and how Seaforth came to be involved, he added: "In early 2022, it became apparent that Calyx was not going to be able to execute on its evolving business plan without additional cash. Calyx sought further investment from a number of sources. It was unable to attract further investment for a number of reasons, including a change in the (previously very positive) attitude of the investment market towards hemp-related companies. Calyx subsequently found itself in a position where it would run out of cash."

He continued: "In the absence of any viable alternative, Calyx accepted the Seaforth offer after taking specialist legal and financial advice, with the objective of safeguarding employment and the position of the group's creditors, to the greatest possible extent. While Calyx could have communicated better to its shareholders, including Seedrs investors, during this process, it sought to act properly at all times in difficult circumstances and a fast-moving situation responding to specialist financial and legal advice.

"As the new owner of Jersey Hemp, Seaforth has never had any direct relationship or obligation to Seedrs or other Calyx shareholders but made the non-dilutive offer because it thought that it would be fairer to the group of investors, including Seedrs, who came into the business last."

Jersey Hemp referred to Mr Caseley's statement when contacted by Express.

However, Commercial Director Craig Dempster said on Wednesday that he was "pleased to confirm that the last [investor perk items] will be dispatched by the end of this week."