Wannabe Tech Bro Tricks Investors into Funding a Tech Co
Maybe Jeff Dick is “on” to something with his vision for taking an embedded banking product to market via a subsidiary company he's funded by pilfering $18M of MainStreet's assets over the past three years.
From my perspective, it’s neither here nor there. Avenu.bank is a LARP. Dick’s “vision” for it does not right the wrong of risking the bank's assets on ventures that conflict with his promises to investors in the last few capital raises.
For that matter, in Tech Bro lingo, Dick's blown what equates to three rounds of startup funding without bringing a Minimum Viable Product successfully to market. So even if we were willing investors in “his" tech co, we’d have to declare: Game Over!
That's why I’ll be submitting a shareholder proposal for the 2025 Annual Meeting recommending that MainStreet's Board sell MainStreet Bancshares and Avenu.bank.
Disclosure: As of this posting, I own shares of MNSB and may subsequently either dispose of them or purchase more.
Prospective Buyers
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Atlantic Union Bankshares, Glen Allen, VA (AUB)
Burke & Herbert Financial Services, Alexandria, VA (BHRB)
United Bancshares, Inc, Charleston, WV (UBSI)
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Financial Snapshot
†as of 06/30/2024
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Total assets:
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$2.09B†
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Tangible book value per share:
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$23.72†
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NPAs to assets:
| 1%†
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Price to book:
| 63%
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Market cap:
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$128M
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Dividend yield:
| 2.4%
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Trailing 12-month ROA:
| 0.86%†
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Trailing 12-month ROE:
| 8%†
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Scoundrels
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Jeff W. Dick, Chairman and CEO
Terry M. Saeger, Vice Chairman
Patsy I. Rust, Founding Director
Please note, as of this posting, we have no reason to believe the Avenu software, or even the idea behind it are flawed in any way. Avenu staff appear to be competent and well-meaning professionals. Sadly, they’re employed by a reckless Bank CEO and Board instead of a true tech company where they could be awarded stock options and the opportunity to benefit from an IPO someday.
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Red Flags
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Promises, Promises - In 2017, as inducement to raise $18M at $16/share, Dick told prospective investors he would use the funding to grow and sell the bank in three years.
- In 2018, as inducement to raise $45M more at $19/share, Dick reiterated this promise to prior and new investors. Investors in this round are losing money today.
- Even if the three-year clock restarted upon the 2018 promise, Dick was beholden to sell the bank in 2021.
Opportunity Cost and Lost - In Q1 2021, MNSB was trading at $21/share and could have garnered over $30/share in a sale, based on industry M&A pricing at time.
- Instead of selling as promised, which would have delivered investors an ROI of over 50%, Dick began funneling the bank's assets into a high risk tech venture.
- Six years after Dick reiterated his promise to sell in three, MNSB is trading at just over $16/share —13% below the 2018 offering price.
- To add insult to injury, Dick raised his $666K salary to $1,583,000 total compensation in 2023.
Comedy of Errors - Note, Dick is a decent banker. He successfully raised capital from bank investors and grew a startup bank into a valuable franchise.
- Dick is not a software engineer. He’s never run a tech company. He never raised venture capital from willing and witting investors looking to build their stock in tech ventures.
- Dick has spent three years and $18M to build a sandbox and allegedly contract seven prospects to "start" integration.
- Dick’s sandbox is a non-performing asset.* Based on like ventures in the fintech space, it’s fair to assume it will require at least as much new money to make up for lost ground and turn a true profit.
- As Chairman of the Board, Dick pursued this costly, risky endeavor without ensuring the Board had the competencies needed to manage all the new categories of risk the venture entails.
- We understand, Dick is having the time of his life. See Dick smile. He’s soooo much smarter than Synapse’s Sankaet Pathak and Unit’s Itai Damti.
Opportunity Ahead? - Is Avenu.bank a promising venture? Who knows? Dick hasn’t felt the need to provide MainStree's investors a proper opportunity to vet the idea. The first we heard of it was Q4 2021 via one paragraph buried at the end of an earnings release.
Investors were shown no pitch deck explaining Avenu's business model, how the NewCo fits into the competitive marketplace precisely, what its projected funding needs and operating cost structure are, how the revenue engine really works, or when Avenu is shooting to break even in its own right.
- Is Avenu en route to being America's Revolut, except via a reverse path and homegrown? A hybrid between Revolut and Chime, but for an exclusively B2B market? Something between Revolut and Unit, but with a pared down set of services and functionality? A seasoned tech investor can make some inferences, but Dick isn’t saying.
- Who are Avenu’s Seven Mysterious Prospects? Dick hasn’t bothered to provide even the most generic descriptions of the customers he’s allegedly already contracted. How big are these organizations, where are they located, how much revenue is he anticipating from each one, over what period of time, and by what logic is he estimating it?
- For that matter, what happened to the 26 customers Avenu supposedly had back in 2022 when Dick reported the venture had brought $67M of deposits to the bank? What happened to the deposits?
We Have Questions!
However, it’s too late to ask them, and we know everything we need to know: Dick is not the kind of Tech Bro CEO you give more money and runway, and MainStreet’s Board has proven incapable of managing the risks of his technology plays.
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Sources
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- Confidential interviews with shareholders and analysts
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