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Lionel Messi’s fashion royalties and shipping’s road to Nasdaq

Nasdaq Heidmar is latest shipping company to opt for non-SPAC reverse merger

Source: lloydslist.com/LL1149627/Lionel-Messis-fashion-royalties-and-shippings-road-to-Nasdaq#:~:text=According%20to%20securities%20filings%2C%20MGO,the%20football%20legend%20this%20November

22 Jun 2024, by Greg Miller

Some shipping listings are acquired from public companies that have nothing to do with shipping — which makes for some colourful Nasdaq origin stories. Heidmar’s reverse merger plan is the latest example

WHAT do football great Lionel Messi, the sister of fashion designer Tommy Hilfiger, the tasty dark-roast coffee of Café Caribe, American flags, online advertising and California surfer dudes have in common?

They all played passing roles on the long and winding road of shipping companies seeking Nasdaq listings.There are different paths to Wall Street. There are initial public offerings and direct listings. 

There are also reverse mergers, when a shipping company takes over an existing listing.Reverse mergers are commonly associated with special purpose acquisition companies (SPACs), but they also involve businesses that are effectively selling their listings — and that’s where football, coffee and fashion come in. 

Heidmar merger after MGO bows out of Messi licence

Tanker and dry bulk pool operator Heidmar has been on the hunt for a public listing for more than a year.

Heidmar, which is based in Athens and led by CEO Pankaj Khanna, announced plans in March 2023 to merge with a SPAC, Home Plate Acquisition Corporation. That didn’t work; Heidmar terminated the agreement in October 2023, citing adverse market conditions.

A new path to a public listing was revealed Thursday: a merger with MGO Global.

Florida-based MGO Global was founded by Argentinian businessman Maximiliano Ojeda and his partner, Ginny Hilfiger, sister of Tommy Hilfiger. The company made headlines when it secured exclusive rights to Messi’s personal brand for sales of clothing and accessories.

According to securities filings, MGO signed a four-year agreement for use of Messi’s trademark for fashion and agreed to pay him minimum guaranteed royalties over the period of €4m ($4.3m). A final payment of $1.6m was due to the football legend this November.

The price was too steep. MGO bowed out in March. It sold the Messi license (and the obligation for the final royalty payment) to a much larger clothing company, Centric Brands, for $2m.

That game changer left MGO with only one other retail business, one that does not seem to justify a continued Nasdaq presence: Stand Flag Poles, an online seller of residential flagpoles and American flags. It purchased Stand Flag Poles in March 2023 from the nephew of MGO’s former chief marketing officer.

There’s no language in the merger agreement or the announcement about the divestiture of that business, although the general pattern in reverse mergers is for the legacy business to eventually exit. Lloyd’s List sought comment from Heidmar on whether it would continue to sell American flags and flagpoles.

The merger with Heidmar is scheduled to close by late 3Q24, with MGO shareholders to own 5.66% and Heidmar shareholders 94.34%. The stock ticker would change from “MGOL” to “HMAR.”

MGO is being advised by investment bank Maxim, a financial institution known in shipping circles for its handling of dilutive equity offerings by Nasdaq-listed Greek shipping microcaps in 2019-2022.

Prior to the merger agreement with Heidmar, Maxim served as sales agent for an at-the-market (ATM) equity offering of up to $1.65m of MGO shares that began in February, shortly before the Messi contract was transferred.The ATM raised $736,000 via time-to-time sales through June 7. According to a securities filing on that day, MGO had the potential to offer $2.65m in additional shares.Two weeks later, on the day the Heidmar agreement was disclosed, MGO’s share priced surged 63%.

A shipping reverse merger that didn’t work

Maxim also advised London-based dry bulk and tanker freight logistics provider Delta Corp in its proposed reverse merger with New York-based Coffee Holding, announced in September 2022. Delta Corp is led by chief executive Mudit Paliwal and chairman Peter Shaerf of AMA Capital Partners.

Coffee Holding, with a motto of “committed to coffee, committed to you”, is a wholesale coffee roaster and dealer whose flagship brand is Café Caribe. It is a family-run business on Staten Island founded over a half-century ago.

Coffee Holding shareholders were to own 4.79% of the combined entity, with Delta shareholders to own 95.21%. The ticker was planned to change from the coffee-flavoured “JVA” to “DLOG”.

Unusually, the language of the agreement and subsequent announcements implied that both businesses would continue — creating a shipping/non-shipping microcap conglomerate.

Coffee Holding chief executive Andrew Gordon said in November 2023 that the merger with Delta’s shipping operations would help his coffee business with its financing costs, and allow it to better execute growth initiatives, improve margins and lower overhead.

A proxy statement sent to shareholders in March affirmed that the coffee business “will continue” under the public holding company, and “the fact that JVA and Delta operate in different markets allows JVA to mitigate sector-specific risks and mitigates associated exposure for both companies”.

But the merger of the two companies did not go forward, a setback for Delta’s plan to list on Nasdaq.

The agreement required shareholder approval, and when the vote was finally held this April, a year and a half after the deal was first announced, it failed to pass. The merger agreement was officially terminated on Friday.

The connection between Greek shipping and California surfing

Product-tanker owner Pyxis Tankers, led by Greece’s Eddy Valentis, debuted on Nasdaq in October 2015 after merging with LookSmart. Like MGO and Delta, Pyxis was advised by Maxim.LookSmart was a San Francisco-based digital advertising business that owned an online social-media platform called Clickable and an online advertising auction platform called AdCenter. All of the non-shipping units were spun off from the public entity as part of the deal.Long before Pyxis’ debut, the reverse-merger path was used by Greece’s Aristides Pittas for his company Euroseas.

Euroseas began as a mixed-fleet owner of containerships and bulkers. It spun off the bulker fleet into separately listed EuroDry in May 2018, with Euroseas focusing solely on containership leasing.

These two shipping equities, while very small in scale, have performed extremely well. Euroseas’ adjusted share price is up 670% over the past five years and 64% year on year. Eurodry’s adjusted share price is up 230% over the past five years and 70% year on year.

As with Heidmar, the roots of Pittas’ Nasdaq listing were in fashion.Euroseas debuted on Nasdaq in January 2007. It had been trading over the counter since March 2006, when it concluded a reverse merger with Cove Apparel of Sam Clemente, California. Euroseas was advised by Roth Capital.

Cove Apparel couldn’t have been smaller, and it ceased to exist when the Euroseas merger was finalised. According to securities filings, Cove Apparel had one full-time employee at the time — a lifelong surfer running the business out of his house — and sold third-party casual surf wear and accessories for men, women and juniors. It had $3,000 in cash and more than $90,000 in liabilities, and its OTC shares were valued at $0 (until the days prior the Euroseas filing, when they shot up to 55 cents).

Almost two decades later, the public shipping entities that arose from the shell of Cove Apparel — Euroseas and Eurodry — are posting combined revenue of over $200m per year.