Exaro - The End Game

At a Board Meeting yesterday morning, the Directors of Exaro Holdings Ltd. voted to wind up Exaro, the online investigative news channel. This is now public knowledge as a result of a Tweet from the former Editor so there is no need to abstain from comment. At the meeting (which I attended through a dial-in call), I abstained on the vote not because I thought that the winding up was unreasonable given the commercial situation but because I had not been consulted on the matter beforehand and because I had concerns about a number of internal issues which I am confident would be resolved once I had drawn them to the Board's attention. Immediately after the Board Meeting, I resigned as a Director of Exaro Holdings Limited and write now only as a minority shareholder and private individual.

In two weeks (date as yet undetermined), there will be a shareholders meeting. Since I speak for only 18.2% of the shares (20% if proxied by others), the outcome is a foregone conclusion but I think it important, because Exaro has a public interest aspect, to lay out such facts as will set the record straight for the future and to raise one issue of public interest.

First, let me make it clear that the decision by the majority shareholder to withdraw support is a commercially sound and reasonable one. I will have more to note on the commercial aspects below but I have no reason to believe that the decision had anything to do with editorial content.

At the prior Board Meeting, a number of decisions were taken - that the Company was not commercially viable under current arrangements and that, while the Company was acknowledged to have public interest value, a time frame should be set for ensuring that the Company became viable. Support was committed to the end of 2016 on strict condition that the Company had a business plan and business model which would demonstrate incontrovertibly long term commercial viability. The task of creating such a re-orientation of the business was given to the Managing Director and a Sub-Committee of the Board was set up (including myself) to work on such a plan once immediate issues related to editorial staffing were resolved (expected to be around this time).

The commercial viability of an investigative journalist unit was always going to be a issue of concern. Some errors were made at the beginning which may be useful to any who follow in our footsteps. There is no point in going over old history but the bottom line is that the original plan that my team formulated was put on ice because a judgement was made (a reasonable one which I fully accepted at the time) that the first year should place all resources into the hands of the Editor in order to establish the brand and the positioning. My short period in management thus coincided with a period in which there was no management other than to support editorial. By prior agreement, I ceased to take a managing role after six months and became a Non-Executive Director based on my minority shareholding. I attended Board Meetings but had little role other than to assist in defence of reputation, more as an associated individual than as an official spokesperson.

During this lengthy period, I repeatedly noted that the Editor had accrued too much power under the guise of 'editorial independence'. This meant that the first stage strategy of creating the brand through content had morphed into a commitment to the expense of content without adequate commercial revenue to support it. The primary lesson for those who follow us is to institute strong management and commercial control of editorial from the very beginning in every area except direct content and to ensure an editor is in place who has a strong understanding of market realities. No private sector entity can be a bottomless pit into which money must be poured.

From this perspective, I wholly accept that the senior shareholder and creditor, evaluating the matter with his own team, came to the conclusion that Exaro had become such a bottomless pit even if I am disappointed that the reversal of policy at the preceding Board Meeting was not undertaken with some prior consultation with the Director representing the minority shareholders. My abstention was a function of being surprised by the policy but should not be construed as disagreement with it. The lack of consultation simply meant that there was no time for this Director to consider carefully the 'interests of the Company' beforehand. However, the decision is now accepted as in the best interests of the company as commercial entity. Clearly, the Managing Director recommended that there was no viable commercial rescue plan and that we would be wasting more funds and time to create one. I am afraid that I have no magic bullet to hand that says otherwise. I would only have been able to say otherwise if I had been directly engaged in the evaluation and around six months' further of risk money had been made available. It would have been too much to expect the majority shareholder to risk more at this stage.

Under these circumstances, I respect the decision of the primary funder and go further in thanking him for his exceptional public interest support for Exaro to date (far beyond the point that I might have done in his situation) and for his personal commitment to editorial independence throughout. I have no reason to believe that editorial content played any role in the decision. It was never an issue at any Board Meeting throughout the history of Exaro although of course I cannot speak for the final decision because I was out of the loop on that one. My judgement is that it did not.

If anything, the funder's faith in editorial was not reciprocated by editorial which proved somewhat unco-operative in considering the commercial base for the operation at every stage but this is not a time to cast stones. Yet, whatever the decision is, it is not the 'act of vandalism' claimed by one outgoing figure. It was a probably necessary final act after a long period of being tolerant of an over-emphasis on the public interest mission of Exaro without understanding commercial realities. Exaro never was intended to be a charity. It was designed to be a new business model for investigative journalism. In that, it has failed.

The question is now - what next?  Formally, the Company will be wound up (whatever my minority vote says) in about two weeks' time. Because it does not have a business model to hand, it is not salvageable unless a third party magically appears and makes an offer for the Company or the assets to the majority investor to which I must agree (and to which, unless obviously destuctive, I would agree). Such a purchaser would either have to understand the need to invest in the business planning agreed one month ago with or without me or find some synergy with existing operations. I will assume that it is not salvageable and will be wound up in two weeks.

However, I have one last public interest concern. The historic work and data of Exaro provides an important contemporary historical archive of some four years of investigation and it should be preserved. If it has no commercial value to New Sparta and is not of interest to a third party, then the Board (of which I am no longer a member) should consider this public interest aspect of the case and either preserve it as an archive asset within New Sparta available to the public (which would be of minimal cost) or transfer its brand and content to either an individual or public interest institution who can at the least maintain it for scholars and at the best maintain it for public access. I am raising this concern with the Company and hope that the archive can be maintained by transferring it by agreement to a third party before the winding up - if no third party appears to acquire the assets for commercial purposes by the due date. I shall keep readers informed of my progress.

Finally, for all the failures, it was a noble experiment and, although controversial (which is no bad thing), for some four years it did hold power to account on many fronts. The dominance of the child abuse story has been much exaggerated as even a cursory review of the UK archive Page of the online journal would demonstrate. Even the child abuse narrative (about which, in retrospect, it became a little over-concerned) undoubtedly helped to raise awareness of the necessity for the State to stop pretending that institutionalised sexual abuse was something to be ignored and so tolerated. The modernising elements of the State have picked up on this, helped also by awareness that, as in the case of Rotherham, tolerance of sexual abuse was not a matter of Right or Left but of flaccid elites turning their gaze away from the vulnerable and the difficult in society. The engine of reform has now started and we will see a very different cultural framework for the protection of the vulnerable in this area within three to five years - Exaro contributed to that greatly. I am honoured to have initiated the Exaro project and only regret the necessity of having to become little more than a supportive bystander for so many years

I want to give express my personal appreciation to Jerome Booth, whose patient funding over many years cannot be dismissed by those whose own money is not at stake, to my former colleagues on the Exaro Holdings Board and the Company's advisers, to the former Editor Mark Watts (who may have broken with Exaro in recent months but who was instrumental to the development of its original mission) and to all the editorial and staff of Exaro who showed unstinting commitment and who it would be invidious to name individually lest someone be forgot. And a word for the original team at one of our companies PendryWhite who set up the design and branding and the online platform on a shoestring budget under the direction of Jenina Bas.

And so the wheel of fortune turns ... any serious interest in either the archive idea or some 'deus ex machina' to save the business should go to either the Chairman of Exaro Holdings, Jerome Booth, at New Sparta or you can connect with me on LinkedIn for a chat. The silence may, of course, be deafening ...

https://uk.linkedin.com/in/timpendry