Avoiding Lawsuits and Fraud Via Potentially Rigged Assets, Manipulated Stock, Scams and/or Inflated Asset Values

Uptech AG (9AU.GR)

 

CASE STUDY: Uptech AG (9AU:GR)

 

COMPANY BACKGROUND

 

While HWCP strives to provide clients with the liquidity they seek, over a reasonable time period with beneficial terms, it is not always the case that a deal can be structured. A very good example occurred in October 2019 when an independent agent for a large holder of 9AU.GR sought to structure a transaction. The agent was not an employee of 9AU.GR but we believe the agent had a previous business relationship with the potential client seeking to structure the transaction using his 9AU.GR holdings. HWCP had no relationship to the agent. As with all HWCP structured transactions, HWCP signs fee agreements with the agent confirming we would transfer the origination fee from the client proceeds of any transaction to the agent. Agents are compensated by the client and not HWCP. This is the same arrangement in any deal we structure. No commission is ever offered or paid.

 

ADVANTAGES

 

Reputable and ethical firm built on helping clients. HWCP exists thanks to word of mouth referrals from clients who have benefitted from our services. Years of established trust and relationship building put High West Capital Partners in a position where we value and protect our reputation fiercely no more so than making sure we perform due diligence on every potential structured facility.

 

Position
Concentrated
Term
1 year
Facility Amount
USD

OVERVIEW

 

High West Capital Partners, LLC (Nevis) announces that it is not able to structure deals for all publicly traded assets. HWCP avoids a 100% loss on a potentially rigged asset or manipulated stock. How HWCP avoids scams and/or inflated asset values. An overview of how the process works for both sides of a transaction.

 

BACKGROUND OF STRUCTURED PRODUCT

 

While HWCP strives to provide clients with the liquidity they seek, over a reasonable time period with beneficial terms, it is not always the case that a deal can be structured. A very good example occurred in October 2019 when an independent agent for a large holder of 9AU.GR sought to structure a transaction. The agent was not an employee of 9AU.GR but we believe the agent had a previous business relationship with the potential client seeking to structure the transaction using his 9AU.GR holdings. HWCP had no relationship to the agent. As with all HWCP structured transactions, HWCP signs fee agreements with the agent confirming we would transfer the origination fee from the client proceeds of any transaction to the agent. Agents are compensated by the client and not HWCP. This is the same arrangement in any deal we structure. No commission is ever offered or paid.

 

VALUE OF THE ASSET

 

When structuring a transaction, the most important thing for HWCP to understand is the actual value of the asset being offered in the structure. In this case it was shares of 9AU.GR. The most basic step in determining intrinsic value is to look at the former and current share price. You must know where you have come from to at least start to understand where you are going. The share price of 9AU.GR back in October 2019 when HWCP was approached about doing a deal was roughly $4.50 USD. The following dates and timeline can be viewed on the chart below.

It should be noted at the end of 2017 the stock price went from $0.30 USD to over $50.00 USD in a period of days and then crashed back down to $10.00 USD during the first half of 2018. By 2019 the shares were trading under $3.00 USD trending toward $1.00 USD in June 2019. From June 2019 to October 2019 the shares immediately jumped back to the $4.50 USD level (in a matter of days) where they traded during June, July, August, September and some of October 2019.

HWCP was approached in September/October 2019 and the client wanted a USD valuation on the stock the client was willing to put into the structured product. The client wanted to use $4.50 USD per share as the valuation price. After reviewing the price movement describe above and the highly volatile bitcoin industry Uptech Ag operated in, HWCP determined that the true value of the asset was only roughly $1.00 USD per share. This was a significant difference to the current share price at the time. Based on the legal agreements in place and the structuring documents legally executed, HWCP had every right to structure a deal based on $1.00 USD per share.

 

 

Since HWCP values its relationships with clients and strives to make all clients successfully achieve their financial goals, HWCP approached the client and informed the client in order to do a deal HWCP would not use $4.50 USD per share but rather $1.00 USD share. If the client wished to proceed, we would move forward but if they did not mutually agree, an agreement to terminate the deal minus the customary significant termination fees would be the outcome. There were minor third-party brokerage fees, associated with the client opening a brokerage account in the client’s name, that HWCP could not waive but agreed to split such fees if the client did not approve of the valuation. HWCP retained all rights as the client reviewed the very fair options presented.

Ultimately the client appreciated our analysis and approach but was not happy with the valuation and decided to not proceed. HWCP agreed to not structure using the lower valuation, and the client was able to seek different alternatives for the client’s needs. As can sometimes be the case, the independent agent for the deal was not happy the deal fell apart. These agents, though they work for the clients, have no money at risk in deals, they have no asset at risk in these deals, and they are purely motivated by getting a deal closed. Such motivation sometimes works against both a client and HWCP.

The agent’s view was he had spent a lot of time and energy and that HWCP should have used the current market price of $4.50 USD per share and just structure the transaction. The agent had no fiduciary duty to the HWCP capital at risk. All he wanted was his origination fee from the client which would be paid on a successful deal. The client in this case agreed with the agent and was hoping to use the $4.50 USD per share valuation to structure a deal and potentially leave HWCP with large losses. The agent was very upset and did leave HWCP threatening voicemails about flooding the internet with fake stories about how we do business. We understand people can get let down when deals don’t happen, but we must be true to our clients and ourselves. We are not sure if this agent is behind some of the recent fake news stories about HWCP but ultimately it does not matter, reviewing the 9AU.GR situation is a great example for potential clients.

 

HOW DID THIS ALL TURN OUT?

 

 

Though we have the benefit of hindsight we are fortunate we stood firm to our valuation analysis. As detailed in the chart above, not long after HWCP declined to move forward with a valuation of $4.50 USD per share, the 9AU.GR stock price crashed to under $1.00 USD! This was after HWCP returned all rights to the 9AU.GR stock back to the client. For absolute clarity there is no way HWCP caused the crash in share price as we were not involved in the stock at all. Further over the past year in 2020 the 9AU. GR stock continued to crash to a level of $0.28 USD per share as the end of August 2020 (the chart above is in Euros).

The share price movement in October 2019 is not related to any news release we could find on the company, maybe the client went to another firm and achieved a valuation of $4.50 USD per share? HWCP has no idea but we are fortunate we did not structure a transaction as we would be left with basically a 100% loss.

Structured finance transactions are time consuming and can be risky for HWCP. We seek to provide clients the best terms and solutions for their needs. The 9AU example highlights passions and concerns on all sides of a transaction. All HWCP can do is be open with potential clients, and we feel how we acted with 9AU. GR represents how we act in every transaction we are honored to structure.

Oddly, even seeing the recent share price declines, the independent agent for the 9AU.GR transaction is still upset with HWCP and still blames us for not getting a deal done! He still blames us for him not earning his origination fee from the client. He still blames us for “scamming” the client and not using a valuation price that collapsed within days of us passing on the deal! He makes no apology for showing us a deal that would have been a complete and immediate loss.

COMPANY PROFILE

Uptech AG operates as an investment company. The Company focuses on blockchain and distributed ledger technologies. Uptech serves customers in Germany.
Security Type
Shares
Region
Europe
Sector
Financials
Stock Symbol
9AU
ISIN
DE000A0SLML9
S/N
A0SLML
Founded
01/16/2018
Number of Employees
--
Address
Gormannstrasse 22 Berlin, 10119 Germany
Phone
49-30-844-357-60