We got the first straight answer that we’ve ever heard about PledgeMusic. This is from the UK Insolvency Service regarding the PledgeMusic debacle in response to my tweet yesterday:
We really appreciate the Insolvency Service taking the time to respond so quickly.
It’s been awfully quiet over at Pledge Music. After declaring in May they were going into administration (UK equivalent of bankruptcy) I can find no reporting that indicates Pledge has even started the process.
Here is the current website notice. Completely lacking in specifics. Nothing about administration. Maybe this is normal. Maybe it’s not. I will say that publicly available documents indicate the financial history of Pledge Music is extraordinarily complex. And if I were an administrator or creditor I would have a lot of questions. This could be the reason for the delay.
My colleague here at the Trichordist, David Lowery published this extensive overview of the Pledge Music fiasco two months ago. In the article he goes beyond the SEC charges against one of Pledge Music’s current owners and looks into the strange structure of the company; the multiple sub companies; the related entities; the offshore “panama papers” shell companies; and an SPIV (special purpose investment vehicle). Quite a complex structure for a company of its size.
Go read the piece: The Pledge Music Fiasco is Weirder Than You Think.
I’ve been looking at another loose end with Pledge Music. Who was the original investor that funded the company? Here is an excerpt of an April 2015 interview that Benji Roger (Co-founder of Pledge Music) did with Andrew Warner of Mixergy.
Andrew: Where did you find the angel investors who funded this and allowed you to actually bring it to fruition.
Benji: It was somebody I knew. I basically pitched them the idea and I said, “Who should I send this to?” I sent out, I think, five business plans originally and I said, “Who would you send this to? Who do you think this is a good idea for?” One guy wrote back and he was like, “I love this. This reminds me of how Obama was elected.”
Andrew: Who was the guy?
Benji: He was just a friend. He’s a private guy. He doesn’t want to–
Andrew: He doesn’t want–can you tell us what he does for a living that he can suddenly do this? Is he a musician? Is he an entrepreneur?
Benji: No. He’s in a totally other space. He’s in a totally other space. He’s a very private lad. I don’t want to–
Andrew: But you can’t even say what his background is?
Benji: No. He went to business school.
Andrew: That’s it?
Benji: That’s what I will say.
Andrew: Is it his dad’s money? His parents money?
Benji: No. It’s his.
Interesting. Go to the UK website where UK companies file required corporate documents. Look up Pledge Music LTD. By process of elimination (all the other original investors are listed by real name) it seems the silent investor is represented by an anonymous Panamanian company called Dolan Services Inc. This is from the 2010 Shareholder list.
What are the chances that PledgeMusic will just disappear into the night, never file bankruptcy and never pay back the artists, fans and vendors? The less you talk about Pledge’s misdeeds, the more likely they simply are never pursued by anyone.
“Who’s that walking in these woods? Why it’s Li’l Red Riding Hood”!
From “L’il Red Riding Hood” written by Ronnie Blackwell and performed by Sam the Sham & The Pharaohs
Hypebot reports that the PledgeMusic board of directors issued the following statement:
PledgeMusic is still pursuing a sale (which if it happens is likely to be via an administration) but has contingency plans for other insolvency processes if that is not achievable. [emphasis mine]
So what does this mean? I still caution artists that these posts are not legal advance and to take advice from UK insolvency counsel, and the reader should bear in mind that not only am I not a UK lawyer but I’m not a bankruptcy lawyer either. Based on a panel on the Pledge Music debacle I moderated at the Austin Bar Association with two Texas bankruptcy lawyers (who I’m sure would agree that you need to take advice from competent UK counsel) it sounds to me like the company means to pass through “administration” which is a UK insolvency procedure that can be similar to the US concept of liquidation bankruptcy as I understand it. Hence the “…via administration” reference in the Pledge board’s statement above that I highlighted.
I think it is safe to say that anyone purchasing the Pledge assets likely would be unwilling to take them without relief from any obligations to make good on Pledge’s liabilities. In the US, we have a concept of a “prepackaged” bankruptcy where there are buyers for a company’s assets from big assets down to computer monitors who are only willing to buy if they don’t get sued by the creditors. This usually involves getting creditors to agree to low or no compensation with the court blessing the entire plan. I’m not quite sure how this works in the UK since administration proceedings are not typically heard before judges as I understand it, but it sounds like it might be similar. It’s also something that tends to happen most often in a reorganization bankruptcy where the company re-emerges as a whole having shed its debts, instead of a liquidation bankruptcy where the company does not re-emerge at all.
My bet is that everyone knows that an agreement of the creditors (if artists are indeed creditors) will never happen in this case so I would expect to see some muscle being exerted, assuming that the government doesn’t step in to block any administration action pending the completion of any civil or criminal investigations that may be ongoing.
My own curbstone assessment of the board’s statement is that they are going to try to pass Pledge through administration as fast as they can. What that means for artists who were stiffed by the company is anyone’s guess at this point but clearly calls for heightened vigilance.
[Editor Charlie sez: Nice to see industry organizations that claim to be interested in artist rights actually doing something to help.]
UK Music industry organisations including @PRSFoundation, @prsfund, @UK_Music, @WeAreTheMU and @AIM_UK launch impact survey to aid support of artists and businesses impacted by @PledgeMusic‘s collapse.
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