The rise and fall of WANdisco
Co-founder David Richards stands down + Easter + Other stories that matter
Not so long ago Sheffield-based WANdisco looked to be one of the hottest technology companies in the UK. Its stock market valuation reached $1 billion earlier this year, a landmark for any tech company, after WANdisco announced a string of new contracts with international businesses. WANdisco has about 180 employees, most of whom are in the UK, and helps companies move their data to cloud computing services.
However, on March 9 everything changed…
The graph above shows WANdisco’s share price over the last two years. It does not go beyond March 9 because on that day trading in the company’s shares was suspended. WANdisco announced that it had found “significant, sophisticated and potentially fraudulent irregularities with regard to received purchase orders and related revenue and bookings, as represented by one senior sales employee”.
The company said the discovery of these irregularities “significantly impact the company's cash position and lead to a material uncertainty regarding its overall financial position and significant going concern issues”. Revenue for the current financial year would not be $24 million, as previously stated, and instead was as low as $9 million. WANdisco asked for trading in its shares to be suspended so that it could conduct a full investigation with external advisers.
Since then WANdisco has appointed FRP Advisory to lead that investigation and brought in Ken Lever, the former boss of software business Xchanging, to chair the company.
Today WANdisco has announced that co-founder David Richards is standing down as chief executive. Erik Miller, the chief financial officer, is also standing down.
The statement from WANdisco includes a remarkable update on the investigation. The bold has been added by me:
The independent investigation has confirmed that purchase orders giving rise to recognised revenue of $14,936,215 for FY22 are false and that sales bookings of $115,461,616 recorded in FY22 are also false.
In other words, $15 million of revenue and $115 million of future orders do not actually exist. In hindsight, the fact that WANdisco did not name the businesses it had won contracts with as part of those previous announcements should have been a red flag.
The statement today adds:
The results of the independent investigation to date continue to support the initial view that the irregularities are as a result of the actions of one senior sales employee. FRP Advisory is continuing to pursue the investigation to reach a conclusion.
WANdisco said the departures of Richards and Miller “are not connected to the findings to date of the independent investigation”. It is about trying to get trading in the company’s shares restarted under fresh leadership. WANdisco adds:
Since the Company's announcement of 9 March 2023, the company has continued to operate and trade in the ordinary course. Assisted by Alvarez and Marsal, work has started to progress a number of work streams with the objective to lift the suspension of the company's shares and position the company for long-term growth and success as soon as practicable. It is in the best interests of all stakeholders if this objective is pursued under new leadership.
Lever will become executive chairman following the departure of Richards and he has brought in a new finance director to work alongside him.
This is the second time that Richards has been ousted as boss of his own company. Richards was fired in 2016 by the-then chairman Paul Walker but was reinstated with the backing of US investors. In an interview with The Times in February he said of being fired:
“I don’t want to be crass because the death of a human being will never compare to a business. Nonetheless, it’s the same mental process that you go through. You begin to focus on what’s actually important. It was the best week of my life from a business perspective. I knew what I needed to do when I came back. And I artificially put myself through the same thing all the time now.”
The full interview with Richards is here. He still owns 3 per cent of the shares in WANdisco. In the statement from WANdisco today there is a short statement from him:
"I am sad to be leaving WANdisco after 18 extremely enjoyable years. I remain a passionate supporter and significant shareholder of the company."
Easter…
Just a note to say that there will be no Off to Lunch over the Easter weekend - Friday April 7, Sunday April 9 or Monday April 10.
However, new episodes of our Business Studies podcast will be with you as normal on Tuesday April 4 and Tuesday April 11.
Off to Lunch will return on Friday April 14.
Other stories that matter…
The Midlands is getting its own Northern Gritstone. Eight universities in the Midlands have launched Midlands Mindforge, which aims to raise £250 million to invest in promising businesses spun-out of the universities in the area. The universities involved include Birmingham, Loughborough, Nottingham and Warwick (Financial Times)
A collection of Manchester-based business leaders have written to Mark Harper, the transport secretary, about the “unacceptable performance” of the TransPennine Express service. The business leaders, which include Bruntwood’s Chris Oglesby, said that between February 5 and March 4 there were 2,200 services that did not run - equivalent to 25 per cent of the contracted network. The letter adds: “Given the severity of these impacts, not just on Greater Manchester but the wider economy, and the government’s commitment to level-up the North and improve rail services, we ask that you reach a resolution that provides a reliable TransPennine Express service in the shortest possible time.” (Business Live)
A vote of confidence in the UK economy from US private equity firm Blackstone. It has agreed to pay £500 million to buy Industrials Reit, which owns small warehouses in towns and cities across the UK. These warehouses are the base for small and medium-sized businesses (Industrials Reit)
Why has the University of Oxford created more spin-outs than Cambridge but fewer big companies? That is the question posed by this Sifted article. It says there is discontent about the amount of equity that Oxford is taking in spin-outs at the expense of founders (Sifted)
US whiskey distilleries are planning a push into single malt whiskies. Scottish brands should be on alert (Bloomberg)
Paris has banned e-scooter rental companies (The Wall Street Journal)
Michael Lewis has put out another podcast episode about the research for his book on Sam Bankman-Fried, the founder of cryptocurrency exchange FTX, who is awaiting trial for fraud. The episode features an interview with Eugene Soltes, a Harvard Business School professor, about the history of white-collar crime and why high-flying business leaders end up as criminals - was it always the plan or did things just spiral out of control? (Against The Rules)
Economist Paul Krugman on why history suggests that chatbots and artificial intelligence will impact the economy slower than we think (New York Times)
Lastly, check-out Off to Lunch’s Sunday press review for a round-up of the business news and features in the weekend papers. This edition includes a look at Credit Suisse, the gambling white paper, the John Lewis Partnership, Archie Norman, Aldi and much more. Paying Off to Lunch members were sent this on Sunday and you can sign-up to read it and receive it next week here.
And finally…
13 years ago today this happened on Soccer Saturday. It is a moment when a live broadcast goes horribly wrong but also horribly right at the same time…
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Best
Graham