PAO Group Inc (PAOG)

[LongShot_Louie]

Maybe I am wrong, but I dont think so....

I think you tend to be blinded by the hype. The available data suggests his experience is greatly exaggerated, but he is in marketing so I guess that's to be expected. Now, remember I am just the messenger on this. However, my dd suggests those raising questions have some legitimate concerns. Let's do a little DD and see what we get, ok?

PAOG pumped Karl Riedel to shareholders as though he were some financial wizard who was instrumental in the building and selling of VMR for $75 million. However, a few minutes of DD indicates this is far from the case. Rather than spearheading the sale of a financially successful economic juggernaut, Mr. Riedel was the Executive Vice President of Marketing for a money losing operation (VMR) that found itself drowning in debt and growing increasingly unable to compete with Chinese competition and US tariffs (https://www.prosmokestore.com/store/blogs/v2-out-of-business-278 ).

At the time of the sale, VMR had over $25 million of accumulated debt, and the sale of VMR was engineered not by company management but by its majority shareholder. Huabao International Holdings Limited. Huabao owned 51% of VMR and stated at the time of the sale that they just about broke even on their $25 million investment in VMR. Following the sale, V2 posted the following on its website:

…

our industry is the subject of an increasingly challenging environment. In addition, our products are the target of tariffs that will alter our cost structure and profitability. After considering these and other factors, we made the very difficult decision to discontinue our operations effective at 4PM Eastern Time on November 2, 2018. https://www.prosmokestore.com/store/blogs/v2-out-of-business-278 op cit.

But why would Juul buy a floundering e-cig manufacturer? Could it have been to gain access to the company’s (Reidel’s) expansive list of “9000” affiliate members and the revenue they provided VMR? Apparently not. For upon buying the VMR, Juul immediately closed it down (https://vapage.com/blog/blog/juul-bought-v2-e-cigarettes-then-closed-the-company-where-can-you-buy-v2-e-cigs-and-cartomizers-or-cartridges/ ; see also https://www.prosmokestore.com/store/blogs/v2-out-of-business-278 op cit.)

Juul’s primary interest in acquiring VMR it seems was the access purchasing VMR gave Juul to the Chinese market. VMR had acquired rights to sell products domestically in China and it was the rights to sell domestically that drove Juul’s interest in VMR, not VMR's economic success or potential. http://www.vapernews.co.uk/uncategorized/why-did-juul-buy-v2-and-vmr-products/ (See also https://www.prosmokestore.com/store/blogs/v2-out-of-business-278 op cit.)

In announcing the transition, the PAOG stated:

Incoming PAOG CEO Karl Riedel was employed most recently as Executive Vice President of Marketing for VMR Products LLC, the largest online vendor of electronic cigarettes and vapor devices. He was with the company for 8+ years and helped carry VMR through a recent acquisition by JUUL Labs, Inc. for $75M (https://vaping360.com/vape-news/72683/why-did-juul-buy-v2-and-vmr-products/). As Executive VP, he was responsible for overseeing online marketing initiatives, E-Commerce sales & promotions, Merchandising both domestically and internationally, Press and Media relations, Search Engine Optimization (SEO), Social Media influencers and engagement, and Affiliate Marketing initiatives. He built the largest affiliate program in the vapor industry the V2 Profit Affiliate Network with 9000+ affiliates worldwide generating traffic and sales to VMR's e-commerce websites.

So, what was Mr. Riedel’s role in the sale of VMR? Well his forte is social media and digital marketing. His position at VMR was Executive VP of Marketing, and as such it is unlikely he played a significant role in engineering the sale of the Company or was deeply involved in negotiations. As noted earlier, the sale or VMR was enginnered by the Company’s largest shareholder, Huabao Limited. What Mr. Reidel did, according to VMR, was “help carry VMR through the acquisition by Juul Labs Inc." Precisely what that means or entails is not clear, but it doesn’t suggest Riedel played a meaningful role in the $75 million sale of VMR. Why is this important?

It is important because it means RBII did not give PAOG an experienced CEO, they gave PAOG an experienced Marketing Executive. Having been one myself, I can tell you these roles are not mutually interchangeable. This leads me to believe there could be a significant learning curve for Mr. Riedel as he transitions from Marketing Executive to CEO, and it raises the question, "Can Riedel handle the transition from Marketing Exec to CEO? Not saying he can’t, just saying it could be a very long slog.

And btw, about that $75 million, exactly how did that breakdown? Well, it seems more than half that amount went to resolve VMR’s debt. VMR itself received an estimated $31 million, and 51% of that belonged to Huabao who engineered the sale to recoup their investment (https://www.prosmokestore.com/store/blogs/v2-out-of-business-278 op cit.).

No bash, no pump, just a little DD to support my position that Mr. Reidel is not the experienced CEO RBII led us to believe had been recruited. That was the pump, now I think we wait to see if Mr. Reidel can grow into the job. My point was he is going to need time to do that and he is going to make mistakes along the way. This is going to be a much longer slog than we were led to beleve, and I think the pump did Mr. Reidel a disservice by raising expectations unrealistically.

Know what you own.