OH BOY
SEC looking into Ignite International's revenue
U S Securities and Exchange Commission (U:*SEC)
Tuesday August 30 2022 - Street Wire
Also Ignite International Brands Ltd (C:BILZ) Street Wire
by Mike Caswell
The U.S. Securities and Exchange Commission has begun an investigation into Canadian Securities Exchange listing Ignite International Brands Ltd., the cannabis company run by poker player and social media guru Dan Bilzerian. The SEC is looking to determine if the company's financial results for 2020 contained false or misleading statements. Specifically, the regulator's concerns centre around the company's revenue for that year.
Word of the investigation is contained in an application that the SEC filed in federal court in California on Monday, Aug. 29. The SEC is seeking a court order that would direct Ignite to turn over accounting records. Among the records that the SEC is seeking are the company's purchase orders, invoices and other documentation that would support its sales figures.
The focus of the SEC's investigation is Ignite's revenue from 2020, which the company reported to be $16.9-million, up from $9.6-million the prior year. The SEC has not said exactly what the issue may be with Ignite's revenue, only saying that there are indications the figure may include false or misleading representations. (The company's 2021 revenue, which the company reported to be $78.7-million, is not included in the request.)
The SEC's application does not mention Mr. Bilzerian, the founder and chief executive officer of Ignite. He is better known as a professional poker player who made a name for himself by amassing a large number of followers (33.6 million as of today) on the Instagram platform. His page attracts endless controversy and attention, featuring private jets, barely dressed women, hot tubs, limousines, guns and parties.
Mr. Bilzerian, who lives in Florida, took Ignite public on Jan. 18, 2019, through an agreement with ALQ Gold Corp., a B.C. metals explorer that had abandoned exploration in search of a cannabis acquisition. The deal left Mr. Bilzerian with control of most of the company's shares. At last count, he had stock or convertible instruments amounting to 199.8 million shares, or 64.5 per cent of the total outstanding.
The SEC investigation, as set out in Monday's application, began on March 14, 2022. The SEC says that it sent Ignite a subpoena that required it to produce accounting records by June 15, 2022. The request covered a wide range of material, including practices on revenue recognition, audit work papers, sales orders, shipping documents and sales forecasts.
The SEC says that Ignite produced some material, but failed to send any accounting records, purchase orders, invoices or other documentation relating to its sales. Instead of producing the documents, the company's lawyer contested the subpoena. As the SEC sees things, there is no basis in law to deny the request. The regulator's mandate includes investigating any conduct that would constitute a violation of the securities laws, be it a civil or criminal violation.
For Ignite, the SEC investigation comes with the company having just gone private. The transaction saw small shareholders receive 62 cents per share, leaving Mr. Bilzerian and a handful of insiders controlling most of the remaining stock. The transaction closed on Aug. 29, 2022, the same date that the SEC filed the application.
Ignite last traded at 55 cents, well off its 52-week high of $1.80.
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