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Old 10-17-2020, 06:05 PM #64
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Are people still buying the crap about Smart Parts being patent trolls even though they owned the patents legitimately and in fact it was WDP who ripped them off? This was all confirmed in the documents in that paintball history documentary.
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Old 10-17-2020, 07:59 PM #65
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Indeed, the WDP/Smart Parts thing... I have a number of field friends who were involved in that mess. WDP was the first to jump on the lawsuit train in that situation. There's a whole rather large thread about that in PB Talk/Legalities. Very interesting read for anyone who hasn't gone through there.
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Old 10-17-2020, 08:11 PM #66
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Quote:
Originally Posted by 4leaf4life View Post
Paint will be at Cup.

This is a restructuring. Still operating the status quo.
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Originally Posted by John View Post
Johnny Rathbun, Sales Manager at GI Sportz, had this to say:
"As many of you have probably read or heard about the Bloomberg report today regarding bankruptcy and GI Sportz. I am here to calm the waters by assuring you that this "restructuring" will not affect any of the brands or products that you get from this company. Chatter is chatter, but rest assured this management group and the company will not be skipping a beat as we navigate into paintballs future. If you have any questions you can definitely ask and we will answer the best we can during this time. More information will be coming out in the weeks but again, we are not going anywhere. Feel free to share if you feel the need."
+1 to both of the above. Glad to hear it. Hopeful that whether it's Kore or another party, the restructuring goes as smooth as possible for everyone at GI affected.

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Originally Posted by Reaper63 View Post
Sadly, I'd almost guarantee Fulcrum Capital is coming out of this with a profit. This is how private equity operates. Buy control of a company, leverage it with absurd amounts of debt to drive up short-term revenue, then sell off the company and its assets and walk away when the debt comes due. It's the same gameplan tanking retailers, media outlets, healthcare providers, and every other industry private equity has gotten its fangs into.
I wouldn't be too sure about that first part, but I don't know for certain. A little more on this later.

With regards to the rest of this: yes and no. PE companies do operate like this generally speaking, but it depends on the specifics of each deal and each firm involved. When these strategies succeed, the PE firm is a cheap source of financing, the target company uses cheap debt to grow exponentially and everyone makes money (think Snapple Beverages). When these strategies fail, the PE firm effectively destroys a lot of value and everyone involved except the lawyers feels a lot of pain (think Toys R Us).

The reason for this is leverage. Back when Fulcrum Capital Partners bought it's majority stake in GI Sportz, the average leverage ratio on deals in the US at that time was 6-7x Debt to EBITDA. Canadian PE firms typically run with less leverage, probably 3-4x historically. I don't know what leverage they had on the deal.

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I think it was only a minority ownership
No. Fulcrum owned the majority.

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Originally Posted by Spikerz View Post
Fulcrum invested 14m I think in them years ago.
https://fulcrumcapital.ca/investments/gi-group

Can't find the actual investment number but somewhere between 14-19 million seems familiar.
I can't find anything to confirm or deny this, but their fund V was 200mm CAD at the time of investment in GI, and exceeded its target of 300mm CAD. Fulcrum as a whole is a relatively small, middle market Canadian PE firm at around $750mm in AUM. They usually look to deploy $10-$35mm to companies doing up to $250mm in yearly revenue.

Say that fund V wanted to make 8-14 bets on different companies (including GI) and earmark additional funds for follow on rounds on half of those. Your number fits the bill roughly speaking.

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I'm still trying to guess how they racked $45M in losses 7 quarters.
Me too. It's startling that a company which did $140mm in revenue back in 2015 could default on only $29mm in debt in 2020. I'm surprised it couldn't be refinanced. However, as per Bloomberg it sounds like Fulcrum triggered acceleration of the debt to liquidate their investment (probably due to a covenant violation), which is unfortunate:

"The company is majority owned by private equity firm Fulcrum Capital Partners. The firm is part of a partnership that in September took over as lenders to G.I. Sportz, replacing Bank of Montreal. The partnership demanded repayment four days after becoming the lenders, court papers show."


I spoke with the analyst at Fulcrum who did the deal after it was announced back in 2015. I offered to industry consult for free because I love the sport and the paintball community. GI Sportz was Fulcrum's very first consumer products sector investment, but I was told that Fulcrum understood the paintball industry "very well" and would "be sure reach out" in the future if they had any questions. Never heard back from them after the initial conversation...
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Old 10-18-2020, 06:31 AM #67
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.



Me too. It's startling that a company which did $140mm in revenue back in 2015 could default on only $29mm in debt in 2020. I'm surprised it couldn't be refinanced. However, as per Bloomberg it sounds like Fulcrum triggered acceleration of the debt to liquidate their investment (probably due to a covenant violation), which is unfortunate:

"The company is majority owned by private equity firm Fulcrum Capital Partners. The firm is part of a partnership that in September took over as lenders to G.I. Sportz, replacing Bank of Montreal. The partnership demanded repayment four days after becoming the lenders, court papers show."


I spoke with the analyst at Fulcrum who did the deal after it was announced back in 2015. I offered to industry consult for free because I love the sport and the paintball community. GI Sportz was Fulcrum's very first consumer products sector investment, but I was told that Fulcrum understood the paintball industry "very well" and would "be sure reach out" in the future if they had any questions. Never heard back from them after the initial conversation...

You have to remember that immediately after that 2015 year of revenue they began their massive expansion and purchasing of assets and IP. Wouldnít be surprised is they spent $10-$15 million in debt during that time, couple that with their extremely poor asset management in a business where assets rapidly depreciate, and their massive investment in NXL Europe and US over 4 years that likely lost a bunch of money, and you begin to see why they had so much debt accumulated.
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Old 10-18-2020, 06:21 PM #68
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Wouldn’t surprise me if other companies follow. This pandemic is going to cause a lot of problems for the paintball industry. Think of all the cases of paint that weren’t sold this year.
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Old 10-18-2020, 06:25 PM #69
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Wouldnít surprise me if other companies follow. This pandemic is going to cause a lot of problems for the paintball industry. Think of all the cases of paint that werenít sold this year.
Other than a slow early Spring, which isn't really a hot time for paint sales anyway, the majority of regional and local events till happened. Most fields have been packed for months, and it seems companies are still moving product. I think just the bloated and underperforming companies will be the ones to fall
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Old 10-18-2020, 06:56 PM #70
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Other than a slow early Spring, which isn't really a hot time for paint sales anyway, the majority of regional and local events till happened. Most fields have been packed for months, and it seems companies are still moving product. I think just the bloated and underperforming companies will be the ones to fall
I havenít been out a bunch this summer but when Iíve played the fields have been pretty busy. I think Covid has had more of an impact on merchandise than people playing.
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Old 10-19-2020, 07:16 AM #71
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I havenít been out a bunch this summer but when Iíve played the fields have been pretty busy. I think Covid has had more of an impact on merchandise than people playing.
I'll second this. Whenever I've been out to the local field it's been super busy. Quarantine fatigue had people clambering for socially distanced outdoor activities. Paintball was/is filling that niche for a lot of people, I think.
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Old 10-19-2020, 08:56 AM #72
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Old 10-19-2020, 09:23 AM #73
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who cares?
Most of paintball considering they supply paint and products to the majority of fields and tournaments
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Old 10-19-2020, 10:28 AM #74
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The Marballizer lawsuit had already happened once between KEE and Valken and got minimal attention and was settled in KEE's favor without much notice from the community. After GI acquired KEE, Valken went for it again and GI started with a cease and desist. Valken didn't stop, so GI sued again with favorable precedence from the KEE lawsuit, pretty much a guaranteed win. Valken just played their cards right with social media and the community and came out looking like the sympathetic victim from the big bad GI bully. I actually don't remember how that lawsuit panned out, didn't Valken actually some out on top in the court? I think graffiti has a full shell swirl to this day.

The paint in question was coming from the South Korea factory that has always made Graffiti, that same factory was temporarily contracted to produce Marbs after the GI acquisition of KEE when the Canadian KEE paint factories were shut down and the GI factory tried to shoulder all the production and wasn't able to keep up. During this time, Marbs came in the "square" graffiti box with the signature silica packets (and the box said made in Korea). Valken also accused GI of hurting the quality of their Valken paint by instructing the factory to add more starch to the mix making the paint tougher and bouncier, but saving GI money in materials. Ironically, all of the Korean Marbs were too fragile, lots of broken paint in shipping and in markers, loaders, and pods. The Graffiti from the same time was still on the tough side and bounced a lot and left larger bruises.

I would really appreciate it if Slowiak would swing by and correct any inaccuracies in my information. Some of it I know to be factual, some of it I "remember" it being factual, but I can't recall why I know it to be factual.
You're pretty spot on.
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Old 10-21-2020, 02:47 PM #75
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How does a company earn 80 million bucks, then declare a loss of 29 million? And.. Are congrats in order to Billy Ceranski, New CEO of KORE? https://www.ksvadvisory.com/insolven...leab3TisQZewjg
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