On 1 May 2019, TechCrunch reported that honestbee co-founder and CEO Joel Sng had been fired from the firm.
Responding to the news, Sng emailed all honestbee staff that night claiming that it’s “fake news”.
He wrote: “I am not an abandon ship person and I will never leave the company to be rudderless. Our investors and board are absolutely aligned on that.”
In contrast to his words, honestbee announced the very next day that Sng is stepping down from his CEO role.
It added that Brian Koo, a descendent of South Korean electronics firm LG’s founding family, is replacing Sng as the interim CEO.
Koo is also a “key investor” of honestbee. He is listed as a shareholder for both of honestbee’s ventures registered in Singapore, and his Formation 8 VC firm has provided significant funding for the startup since the early days.
Sng Reveals “Key Outstanding Debt Obligations” Of Honestbee
It’s not clear why Sng left the company, especially when he declared to his employees that he is “not an abandon ship person” the day before.
An anonymous source close to Sng shared with Vulcan Post his handover email to Koo dated 22 April 2019, which helped shed light on this burning question.
In the email, Sng said that he would need to transfer his shares to Koo in order for the latter to “assist in funding honestbee further“.
I would have to step down as CEO, Melissa Kwee would have to stand down from the Board of Directors and you or your nominated candidate will become the CEO of honestbee and appoint 3 new directors to the Board.
– Joel Sng, honestbee co-founder in his handover email to Brian Koo
These board appointments are subject to the provisions of the shareholder agreement, Singapore law, and the constitution of honestbee, he added.
Sng also went on to detail some of the “key outstanding debt obligations” of honestbee. Here’s the debt breakdown in descending order (all figures have been converted to USD):
- Mirae Asset Daewoo, Formation Group, Brian Koo – US$20.79 million (including accrued interest of US$441,052 as at 30 April 2019)
- Trade creditors – US$9-10 million
- Benjamin Lim Jia-Rong – US$3.8 million (as at 30 April 2019)
- Joel Sng – US$3.8 million (interest-free shareholder/director loan)
- ValueMax Credit – US$2.87 million (with a monthly interest payment of US$21,478)
- Melissa Kwee – US$514,000 (interest-free shareholder/director loan)
- Gay Chee Cheong – US$110,114 (interest-free shareholder/director loan)
In total, honestbee owes a significant sum of ~US$40.9 million. It is not clear if any of these debts have been settled since the email was sent out.
In October, it was reported that the firm has an outstanding debt of S$286 million (~US$210 million) — this is after excluding payments to 1,140 small creditors, who are owed S$500 or less.
Honestbee Has A Cash Burn Rate Of US$5-6M/Mth
Beyond these, Sng also revealed that honestbee has a “cash burn rate of approximately US$5-6 million per month“. Out of this, about US$3.5 million is dedicated to employee payroll.
Last month, it was reported that honestbee owes ex-employees almost S$1 million in unpaid July and August salaries.
We have implemented various initiatives to bring the cash burn down but the current stage of the business is still in a cashflow negative stage.
– Joel Sng, honestbee co-founder in his handover email to Brian Koo
To reduce the cash burn rate, Sng proposed to sell habitat’s food and beverage businesses to a third-party and operate on a “merchant partnership revenue share basis” instead to earn immediate income.
He also weighed the idea of “shutting down the business in a number of locations”.
With these measures in place, Sng trusts that honestbee could be on the path to profitability by March 2020.
He concluded the email by listing his conditions for transferring his shares to Koo:
- Honestbee is put in a position where it can satisfy its existing debt obligations and have sufficient capital to operate for at least 3 months
- Koo and honestbee will “enter into an indemnity” and release any liabilities that Sng and previous board members have in a bid to avoid any potential “attack” on matters leading up to the time Koo takes control of the firm
In July, Koo stepped down from the CEO role. Ong Lay Ann took over as the company’s new CEO and Koo assumed the role of honestbee’s chairman.
Following this leadership change, honestbee announced last month that Koo has resigned from the Board on 12 September 2019.
According to an affidavit filed in court, Koo had “intended to step down from both the management of the company and its board” after it hired a “restructuring specialist who would be able to successfully restructure the company and set it on a trajectory to profitability”.
Here’s a redacted version of Sng’s handover email to Koo for reference:
Featured Image Credit: honestbee