SurfStitch CEO Mike Sonand and chairman Sam Weiss. Photo: Jessica Hromas

Monday, 28 August 2017

Author: John McDuling: Selling surfwear products online in Australia (a nation obsessed with surfing and buying things online) sounds like a cake walk. But Gold Coast-based online retailer SurfStitch hasn't been able to make it work, and the ramifications of that could be far reaching.

The ASX-listed e-commerce company collapsed into voluntary administration last week, and if you haven't been following the incredible saga surrounding it, then here is a quick recap:

In 2014, SurfStitch made waves among sharemarket investors (warning, this piece is going to contain lots of surfing puns) when it splashed onto the ASX through an IPO.

In the IPO prospectus, the company, which was founded by former banker Justin Cameron, and retail executive Lex Pederson, described itself as "one of the leading pure play online action sports retailers globally" and "one of Australia's fastest growing technology companies".

Through its websites, it acted as both a third party retailer, helping others sell surf and skate wear, and a more traditional retailer, selling stock it purchased from suppliers itself, to people in Australia, the US and Europe.

 Initially investors loved the pitch. "If you look out three years, it will be a global business, not a loss-making business, with global scale," Janchor Partners founder John Ho told Fairfax Media shortly after the float.

Less than a year later, the share price had more than doubled, pushing SurfStitch's market value beyond $500 million.

SurfStitch looked like one of Australia's most interesting, and exciting companies. Cameron, who served as founding CEO, talked up the company's aims to hit $1 billion in sales within five years, and its potential to be the Netflix or Amazon Prime of the action sports world. It started investing in content, such as surf forecasting websites and action sports video providers, in a bid to drive more traffic to its websites.

Then came the wipeout (I warned you).

Last year, Cameron abruptly and unexpectedly quit. New management wrote down the value of the company's assets; its financial losses deepened. It is now facing multiple class action lawsuits from shareholder groups, as well as an ASIC investigation. Its shares tanked, and are now suspended from trading.

In a statement to the ASX last week, the administrator FTI Consulting said Surfstitch's ASX listed entity and a holding company had been placed in administration, but its consumer facing online companies continue to trade as normal.

At any rate, the SurfStitch saga could reinforce the perception among ASX investors that Australia just can't do online retail.

Other e-commerce businesses that have made it to the ASX have also struggled.



Happier times: Surfstitch co-founders Lex Pederson and Justin Cameron at the ASX listing in 2014. Photo: Louie Douvis


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