WMI plan to go public and issue shares via an IPO
A few weeks ago I received an email from someone claiming to be an insider over at Wealth Masters International. Amongst other things, the email claimed that
Wealth Masters is going broke they can barley pay their bills. Behind on many invoices and vendors are threatening collection.
Maybe they are not so “wealthy”.
Every so often I get these types of emails from anonymous sources and like this one, if they don’t contain any additional information to back up their claims, I rarely report on them.
After all, anyone can submit anything. Without official clarification, how am I to know what is and isn’t mere speculation.
Fast forward a few weeks however and just yesterday Wealth Masters announced plans to make an initial public offering (IPO) and float the company on the stock market.
For those of you unfamiliar with the term, an IPO is
when a company (called the issuer) issues common stock or shares to the public for the first time.
They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately owned companies looking to become publicly traded.
Of course that’s all very well, but why have WMI founders Kip Herriage and Karl Bessey decided to publicly trade the company?
More importantly, what does it mean for you as a distributor, your business and your potential leads?
Reading the press release put out by Herriage and Bessey regarding the IPO reads like a long winded explanation, without actually explaining anything.
The press release opens with what appears to be an acknowledgement that an injection of funds are needed to keep WMI going in its current state;
As many know, we started WMI with just 10 Members and with lots of people telling us that what we had in mind would not work.
We refused to take on bank debt or buy production. Instead, we remained committed to building WMI debt free and through organic growth only while following our business plan each step of the way…decisions we have not waivered from.
We would not accept income from the conflicts of interest that most competitors accept without blinking an eye at, and incredibly, derive the majority of their income from.
Herriage and Bessey also rule out that they’re plans to float a IPO are nothing more than a blatant money grab;
We would never do anything simply because there was money to be made by doing it, and we would never violate our commitment to integrity.
Put within the context of the email sent to me a few weeks ago (which I still mind you take with a grain of salt), all of this sounds like Herriage and Bessey for whatever reason need an injection of funds and that they’re not too happy about it, but that they also refuse to compromise their position to run WMI as a debt free company.
As to why the injection of funds is needed, who knows. Maybe the business model is failing (despite Herriage and Bessey claiming that WMI ‘is the only $100 million plus, direct selling/network marketing Seminar Company still in business today‘), the economy isn’t quite playing out how they planned, a series of bad investments or maybe existing members are having a hard time finding new recruits.
What I do know is that Wealth Masters’ last two ventures both seem to have failed to create any momentum with the company or its memberbase. Back in November last year WMI announced plans to offer a nutrition and finance subdivisions that their members could market.
The finance division, Opes Partners, launched in the first quarter of 2011 but has now all but seemingly faded into oblivion.
The nutrition division, WMI Pure, appeared to be on track for a delayed September 2011 launch but following the sudden departure of Pure CEO Deanna Latson in July, no formal announcement has been made as to what is happening with PURE.
With September just eight days away, it’s almost as if WMI are pretending that the company PURE never existed and hoping nobody will notice.
In addition to these two seemingly failed ventures, in April this year WMI also managed to attract what they called ‘top producers‘ to the company. Given the co-incidental timing of these marketers all abandoning their current projects and companies to come and work for Wealth Masters, there’s almost no doubt that there had to have been some money in play there.
As a result of these high profile marketers joining WMI, nothing much seems to have materialised. Ryan Nelson, who the company claims is a SEO expert, created the website Wealth Journals but other than that there’s not really much else to show.
Combine all of this, and there’s a very real possibility that perhaps this year WMI has made some rather poor (and potentially costly) business decisions.
Enter the IPO.
The main benefits to Herriage and Bessey by offering WMI as a publicly traded company are
- enabling cheaper access to capital
- exposure, prestige and public image
- attracting and retaining better management and employees through liquid equity participation
- creating multiple financing opportunities: equity, convertible debt, cheaper bank loans, etc.
All of which you can see relate in one way or another to financing of the company. Having attracted so many ‘chiefs’ to the company this year, perhaps a stock option will help to not only to keep the current enrollees but also attract new blood to the company.
Either way, it’s clear to see that the main advantage of offering an IPO are all financial.
Meanwhile on the disadvantage side of an IPO you’ve got;
- significant legal, accounting and marketing costs
- ongoing requirement to disclose financial and business information
- meaningful time, effort and attention required of senior management
- risk that required funding will not be raised
- public dissemination of information which may be useful to competitors, suppliers and customers
The standout disadvantages, in relation to a MLM company, are obviously the increased accountability of management as well as the required release of information which otherwise would have been held private for competitive (although WMI claim they have no competitors) reasons.
Accountability to share holders will be interesting. If we look back on the past 12 month’s failures within the company, if you imagine the same series of events taking place if WMI was being publicly traded at the time, it’s hard to imagine management pulling through unscathed.
Looking forward, with no announced real strategy beyond some ‘major corporate initiatives‘, there doesn’t seem to be much of a road map beyond the IPO at this stage itself.
Finally with a stock price we can peg the success of the company on, as well as annual reports and increased transparency, a lot of the inner workings of WMI will be open for everyone to see.
I personally welcome the transparency but I imagine it’ll be somewhat of a gear shift for WMI management themselves. Herriage and Bessey have enjoyed accountability only to themselves since launching WMI in 2005, so I imagine the added responsibility and accountability will definitely take some time to get used to.
As a member of WMI or someone looking to join the company, either way I’d be watching this space very carefully.
This may help or hurt the company.
Being listed on the stock market usually means they have to open up their finances to various disclosure statements. There are very stiff penalties for faking those. AND stockholders can sue the **** out of them, even as OTC stocks.
If I recall correctly, Zamzuu/YTB’s downfall was going public, thus opening up their books, proving that average income of all their members is less than 1000 per year. The three folks on top earned over a million each.
Maybe this will answer once and for all whether WMI is a real business… or not.
@Kasey
Yeah that’s my primary interest. With Herriage and Bessey going on about WMI being a ‘100 million dollar business‘ it’d be very interesting indeed to see just how much of that is paid out to members.
If WMI is a real business, why was it banned from Norway? I think we already have the answer to your question K. Chang. 🙂
The goal of listing WMI for public trading was mentioned at least 3yrs ago according to this slideshow. (see page/point #8).
http://www.slideshare.net/suzannekwong/wealth-master-international
I have doubts 500 millionaires will be created.
The press release is predictably vauge on details and when this might happen –
“In the days and weeks to come, we will be announcing several major corporate initiatives; each designed to take WMI, and your business, to the next level culminating in the IPO of the company.”
It sounds suspiciously like:
“PURE will officially launch in the Fall of 2011 after a carefully structured series of pre-launch activities.”
I have to wonder if this isn’t simply a distraction to get members eyes off PURE and onto the ‘next big thing’ WMI plans (or plans not) to do.
@Aussie
That’s actually a very good point… although it does leave us with the problem that sooner or later WMI are going to have to launch something (or be accountable for not launching anything!).
WMI may have intention to list the company, but I suspect it will be delayed as much as possible.
They would like to give the impression they have nothing to hide, but my guess is the transparency regulations will be an issue, and listing the company will be a last ditch effort to rake in some money before WMI dissapears.
WMI is not a 100 million dollar business. Actually it has 4 product levels: mPower, M1, M2 and M3, and in addition to the monthly membership fee, the entire income derives from the sale of these products.
To Norwegian authorities it has been estimated that 50 % of the people buying mPower go for M1. 50 % of these people also sign up for the M2 conference, and again, 50 % of these also go for the M3 conference.
Considering M2 and M3, these numbers make sense. Last M2 conference at Puerto Rico had 250 partipants in April this year, and the recent M3 conference in Italy had almost 200 participants. As M2 is arranged twice a year and M3 once a year, it could be 200 M3 sales and 500 M2 sales a year. The price of M3 is $13995 and for M2 $8995. This will make about $7.300.000 a year in turnover for WMI. If the M1 sale is 1000 a year and mPower 2000 a year, this will generate $2.600.000. The sales will then alone make about 10 million dollar in turnover. This is actually not income for WMI, as 59 to 71 % always is paid as commission to refering consultants.
But what about the monthly membership fee? WMI claims to have more than 35.000 members, which alone should bring in $65.000.000 to WMI. Still the total annual income is far away from $100.000.000 even if these numbers are correct.
This sounds bad for WMI, but it can be a lot worse. First of all, the WMI conference tickets are for 2 people. This means that the number of M3 tickets sold for the last conference could be as low as 100. In addition, there is a chance that the WMI staff and invited guests are included in the number of “almost 200” (which is pronounced as “hundreds” in the WMI language). And there are actually rebates that reduce the turnover even more.
Finally, the claim that there are more than 35.000 WMI members worldwide is not true. When Kip and Karl count members, they count both active members and ex-members, and since the membership is for two people, they double this number too. The total number of WMI consultants since 2005 is actually about 18.000, and when you double this number, it is actually more than 35.000. The big problem is that there are now only 1450 active (paying) members, the rest has left already. This makes the annual income from membership fees to be only $2.600.000. It is hard to believe that WMI has a annual turnover of $10.000.000 based on this fact.
The last 12 months about 2300 people have signed up for a WMI membership. Only 650 of these are still members, which means that about 70 % of all WMI signups quit within a year. When counting all members that signed up more than one year ago, only 5 % of these are still active WMI members. This is the true nature of an illegal pyramid scheme, and every potential victim for this scam deserves to know the truth about WMI.
I guess Kip and Karl will have some sleepless night just wondering how I did find out all this. Of course, I will not identify my sources, but I can promise that this is only a short summary of the leaked information I have about WMI.
Update:
The last 15 days WMI has enrolled 27 new members. In the same time, 79 members have left.
Kip and Karl still claims that “Today, we are one of the fastest-growing companies in the industry”.
Sorry, guys, but WMI is not growing at all, it’s a sinking ship. If this behavior continues, WMI will have only 1000 members by the end of January 2012.
WMI can’t even pay their bills. Honestly they are barely making payroll. I guess Wealth Masters is not so wealthy.
1000 members isn’t actually too bad considering the price of WMI’s products. Well, assuming the bulk of their members actually front up the cash for the high end conferences.
I just got word yesterday that they’ve implemented the first step towards an IPO in launching an ‘improved Business Center AND an all new Marketing Central’.
New features include real time stats and video email (emails with video attachments??)… because that’s pretty cutting edge.
On a general note it sounds like they’re putting their new superstar recruits to work on the backend of the business, rather than the frontlines. Wonder how that will work out for existing members.
Ryan Nelson is pretty good. He helped me with my business and after 2 months I was exploding, sales increased 24%. He is kinda hard to follow but he produces results.
WMI was feeling a little pressure but my sources have told me that Ryan has saved the reputation online and has created a huge lead gen. pool for new members.
My thoughts on Ryan are that he is good and has helped a lot of big names in the industry as well as fortune 500 companies. I would wait and see his magic before counting WMI out.
SEO can only take a company so far… at some point you need to realise you’re selling conference tickets to people on how to earn smart money… at which point they realise the smart money is only made when you sell these tickets themselves.
All the reputation saving in the world can’t change that very obvious fact.
Spamdexing is something no serious company would consider. For WMI, it is not only used in big scale, the way it is done is very stupid, look here:
http://www.om4w.com/wealth-masters-international-announces-a-10000-dollar-donation-for-2-deserving-charities/
If ethics mean anything to you when considering marketing, Ryan Nelson and WMI is something you should stay far away from.
I hope Nelson has a much broader strategy up his sleeve than just article spinning. That linked ‘Online Marketing for Wealth’ site is just a spam blog and SEO tactics like that pretty much died with the recent Google Panda updates introduced this year.
WMI is doing fine, every company has growing pains and that is part of the process but WMI is worth Millions, and need I remind you most of the successful marketers started or gain there success from WMI. No one really new what a High Ticket program was before WMI besides Liberty league and some others
but WMI really kicked it off. They are revamping there marketing structure and taking there time creating some awesome sister companies to expand an already good product base.
2008 was the best year for WMI. In 2009 and 2010 the sales was about 50 % of this level, and in 2011 it dropped to 15 % of the 2008 level. In 2008 they recruited about 600 new members every month, but the last 6 months they have totally recruited less than 400 new members.
WMI is not growing, the last year members have terminated their memberships a lot faster than WMI has recruited new members.
They did not, most of them have been top earners in other MLM schemes. In addition, most of the successful marketers have already left WMI.
WMI is not even close to the success that Liberty League or Global Prosperity Group had if we consider the number of people involved. The WMI business plan is a carbon copy of the business plans of these illegal pyramid schemes.
WMI has picked new marketing strategies several times since the divorce with CCP, but nothing has worked so far.
Since you claim to know a lot about WMI, would you please explain why WMI half a year ago still claimed to have 35.000 members when I obtained evidence that they had less than 1400 active memberships?