Shiloah points finger over Matomy slump

Ilan Shiloah  photo: Yossi Cohen

"The attempt now to attribute the company's failure to me is a flight from responsibility."

Advertiser and businessperson Ilan Shiloah is one of the people most identified with digital advertising company Matomy Media Group (LSE:MTMY; TASE: MTMY), but he has had no official position with the company for three years, and his holding in it has decreased. Shiloah, who previously sold shares in Matomy for over NIS 120 million, today severely criticized the company's previous management for the company's dire straits and the steep dive in its share price, a result of concern that it will need a debt arrangement. "I have always thought that the quality of management and the managers was the factor that determines the company's performance and success or failure.

"From the time that the company was founded until its offering, I was the active chairperson who led the company's strategy, and the company always grew in revenue and profits, going from a monthly turnover in the tens of thousands of dollars to hundreds of millions of dollars, with increasing profits, at the time of the IPO," Shiloach said today.

He continued, "For a year after the offering in London, the company continued growing in turnover and profit, and I continued in my job as chairperson. Following the offering and the entry of Publicis, which became the largest shareholder in the company three months after the offering, my status changed from active chairperson to inactive chairperson. I had no majority on the board of directors, and I was unable to continue leading and shaping the company's actions with the support of the board.

"From a personal holding of 35%, which made me, together with my partners, the effective controlling shareholder, I dropped to only a 15% holding. At the same time, in the new structure of the board of directors, I encountered severe differences of opinion with the CEO and Viola Growth (a fund holding shares in Matomy, S.H.-V.), supported by a majority of the board members at the time, about how the company was managed and the need to fire the CEO, because I believed that since the offering, the company had been managed negligently and without strategic direction, while increasing its expenses and making unsuccessful investments in development and acquisitions. When my views were not accepted by the board and the other major shareholders, I decided to take responsibility and resign, and to stop being a partner in a policy that I did not believe in. I thereupon sold more shares in the company."

Shiloah adds, "Three years after I resigned, I see the situation at which the company has arrived due to unsuccessful management, which caused damage to all of the shareholders and to me personally. Unfortunately, I was right. The identity of those responsible for the failure is known and clear. This is another proof that the quality of companies' management and managers is of great importance to their ability to generate value. The attempt now to attribute the company's failure to me, after I was not involved in the company for three years, is a flight from responsibility by those who led the company after I resigned."

Frequent leadership changes

Shiloah is not accusing the company's current chairperson and CEO, but their predecessors. The current chairperson is Viola general partner Sami Totah and the current CEO is Liam Galin. When Shiloach resigned from the board of directors, the CEO was Matomy cofounder Ofer Druker and the chairperson was Rupert Howell. Harel Beit-On from Viola later replaced Howell, and a few months later, under pressure from the Brosh fund, a shareholder, Druker left his position as CEO and Sagi Nir was appointed in his place. Niri resigned after a few months and Galin was appointed to replace him.

Matomy did not respond to the report. Viola made no comment.

Matomy's current market cap is only NIS 30 million. The bonds it issued early this year are being traded at a junk yield of 33%. The company is convening a meeting of its bondholders tomorrow in order to inform them about the situation. Matomy hopes to later reach agreements with the bondholders concerning some concession on its financial covenants, while at the same time reaching agreement with the founders of Team Internet, its German subsidiary, to which Matomy is scheduled to pay $18 million this week for 10% of the shares, thereby giving Matomy full ownership of the subsidiary. This is Matomy's sole remaining business activity, after it recently terminated other money-losing activities.

Matomy raised NIS 103 million early this year in a bond issue on the TASE for the purpose of funding the increase in its holding in Team Internet, which works in the niche of monetizing Internet domains through advertising on them. Team Internet has always made a profit. Over the years, Matomy has acquired holdings in the subsidiary at a rising company value.

Shiloah to participate in Matomy capital injection

Matomy hopes that its existing shareholders will inject capital into the company and help it survive its difficult situation. One of these shareholders is Shiloah, who is expected to also participate in a capital injection in the framework of a general settlement with the bondholders, Team Internet founders, and shareholders. Shiloah currently holds 10% of the shares in Matomy, in which he was one of the first investors, the former controlling shareholder, and chairperson of the board of directors, before resigning in November 2015. Shortly afterwards, in April 2016, Shiloah resigned as a company director.

Shiloah previously sold shares in Matomy at prices that the company's current shareholders can only dream of. For example, in October 2014, Shiloah sold Matomy shares to advertising giant Publicis for $29 million at £2.27 per share, the price in the company's London offering a few months previously. The current share price in London is £0.074, 97% less than the price in the offering.

In 2016, Matomy also signed up for dual listing on the Tel Aviv Stock Exchange (TASE). Before this took place, Shiloah sold shares for NIS 14 million more at prices varying from £0.85 to £0.95, 92% higher the current share price.

Shiloah, 61, is one of the wealthiest and most influential people in the Israeli advertising industry. He is chairperson of the McCann Tel Aviv advertising firm and chairperson and principal shareholder of TheTime group of venture capital Internet investors. Shiloah began working in advertising two decades ago when he joined the Kesher-Barel firm (later McCann), and turned it into Israel's largest advertising firm a few years later. He resigned as CEO of the firm in 2004 and became the group's chairperson, but retained his dominance of the firm, while receiving over NIS 100 million by selling his shares in McCann. Shiloah is known as a habitual tweeter on Twitter, where he expresses strong opinions.

Published by Globes, Israel business news - en.globes.co.il - on November 27, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Ilan Shiloah  photo: Yossi Cohen
Ilan Shiloah photo: Yossi Cohen
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