BeepXtra offering affiliates shares. Unregistered securities?
BeepXtra launched in late 2013 and claim to be based (registered) in the British Virgin Islands. The company offers affiliates commissions revolving around fees paid my merchants to access their payment network.
The BehindMLM BeepXtra review was published in November of 2013 and I was contacted by BeepXtra management about it last month.
On May 14th Angelos Hadjiphilippou, BeepXtra’s IT Director, wrote
At first, i would like to thank you for a very honest review of our platform and service.
I have to admit, you got most of the points right, except some pricing and other minor details which we may have missed in the beginning, but overall a spot-on review. I’ve read other reviews about BeepXtra, both negative and positive, but yours pretty much covers comprehensively all the points.
Bottom line, i would like to extend a proposal for a re-visit. Reason being, and as i mentioned above, the minor points you missed or misinterpreted was due to our platform being relatively young when the review was made. I could personally answer certain questions if you wish and provide some further insides… Call it a private interview or whatsoever!
Wishing you all the best.
IT Director at Beep Xtra Ltd
Not interested in an interview (we see enough excuses for PR opps in this industry) but interested in making any corrections that needed to be made, I emailed Hadjiphilippou back requesting more information:
Can you send me a copy of the compensation plan in English. I’ll go over it and decide whether a review update needs to be written.
If it’s just minor updates then I can update the original review itself.
That was on May 19th and exactly as of today, one month later, I’ve since never heard anything back.
Now news comes that BeepXtra are offering their affiliates shares. Ruhroh…
Accompanying BeepXtra’s announcement is a 30 minute “leader’s webinar” video, in which Lyndon Farrington, credited as BeepXtra’s Managing Director, pitches the shares based on the potential future value of the company:
[14:07] Our question to you is, if there was a buyout from a global giant, would you wish you were a shareholder?
After dangling this carrot infront of affiliates, Farrington then goes on to base the question on a purely hypothetical evaluation of BeepXtra. After some quick calculations, Farrington estimates that BeepXtra is poised to bring in 324 million pounds annually.
How much the company is currently bringing in however (gross or net), is not disclosed.
And it gets better. Farrington goes on to state that, “worst case scenario”, BeepXtra would be looking at 3.2 billion pound buyout evaluation.
Farrington goes on to claim that among his group of initial investors, ‘a decision was made to hold back 300 shares for 6 months‘, so that affiliates ‘could invest in a stable company‘. He reveals that BeepXtra has purportedly “resisted” offers of 3 million pounds for these 300 shares, instead wanting to offer the shares to affiliates.
Two types of shares in BeepXtra are detailed,
- B shares, which return no profit but grant owners voting rights within the company and
- A shares, which grant no voting rights but do generate profit.
Farrington clarifies that himself and Hadjiphilippou hold “B shares”, with “A shares” being what is offered to affiliates.
The going price?
100 pounds a month for 30 months, or 3000 pounds all up.
Knowing how this is going to look, Farrington does his best to repeatedly mention that BeepXtra’s initial investors have promised to keep the company “trading for the first two years”.
As far as I can see though, the writing is on the wall. You don’t issue shares unless you’re looking for a cash injection.
300 shares at 100 pounds a month is 30,000 pounds a month. On top of whatever the other investors might be fronting, that’s enough to keep them going for a while longer yet.
Further evidence of potential financial issues is the requirement that 600 pounds per share be paid upfront (covering 6 months out of the 30). No explanation as to why the first six months need to be prepaid is given.
If BeepXtra isn’t sold to another company, Farrington then touts a 30,000 pound per annum return per share. And of course once sold, “there will (be) no further opportunity to purchase Beep shares”.
At the time of publication, the BeepXtra website advises there are still 238 shares for sale. This means that the company has already generated 37,200 pounds in revenue.
When the shares were initially offered I’m not sure on, but the video promoting the offering of the shares was published to Vimeo three weeks ago.
Putting aside potential financial issues (I’ll give BeepXtra the benefit of the doubt that this is not just a quick cash grab), the questions remains: Has BeepXtra registered themselves with the SEC to offer securities to their US affiliates?
According to the website “BeepStores”, BeepXtra has 94 US-based merchant vendors interested in or currently using the BeepXtra payment system.
The BeepXtra website advises that the US makes up 6.4% of BeepXtra’s current affiliate-base. With a purported 37,000 members, that equates to roughly 2368 US-based BeepXtra affiliates. All of whom are being offered shares in the company.
According to the Securities Act of 1933;
The term ‘‘security’’ means any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a ‘‘security’’, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.
With BeepXtra affiliates being asked to pay 600 pounds upfront and then a further 2200 pounds over 24 months, solely on the expectation of an advertised 30,000 pound per annum return on each share, that the SEC would deem the offering a security is obvious.
The question now is “has BeepXtra registered with the SEC?”, or are they indeed offering unregistered securities to an estimated 2368 US-based affiliates?
Footnote: BeepXtra’s share pitch to affiliates video can be viewed over at Vimeo. The company has disabled embedding of the video on third-party websites, so I’m unable to embed it below as I normally would.