Lark Distilling Co and the Bainbridge badger game


Price at posting: $3.62
Lark Distilling Co. Ltd (ASX:LRK)
THE BADGER GAME sounds like something that might have been played by characters from the children’s book, the Wind in the Willows. It is actually the name for an extortion practice in which the victim, or mark, is fooled into participating in a compromising act (often sexual or stigmatised by society in some way) which causes the mark to become vulnerable to blackmail.
To provide readers with a recent, though fictional example, recall Guy Ritchie’s film ‘the Gentlemen’ in which the editor of a tabloid newspaper is kidnapped, drugged and filmed having sex with a pig. The following morning the editor is shown the footage with the perpetrators threatening to post the footage online unless he drops his investigation and does not publish what he set out to. The editor relents and does not publish.
A real-world example concerns the sometimes first richest man on earth, Jeff Bezos, CEO and Founder of Amazon. Flipping the script, in this case it was the tabloid newspaper, The Enquirer, that blackmailed Bezos. The Enquirer threatened to publish explicit images Bezos sent during an extramarital affair unless Bezos complied with certain demands. These related to an investigation funded by Bezos that was examining whether politically motivated journalism had been undertaken by the Enquirer.
And now to an example that sits somewhere in between real world and fiction, the Bainbridge Badger Game.
Geoff Bainbridge was until February 2022, the CEO of Tasmania-based whisky distiller, Lark Distilling Co. Ltd (ASX:LRK). In an ASX release on 16 February 2022, LRK advised that Bainbridge had tendered his resignation as CEO “to manage a personal matter”. Shortly after the announcement, a video was published by The Australian of Bainbridge smoking what appeared to methamphetamine from a glass pipe. The Australian declined to publish two additional, related videos which are said to involve Bainbridge masturbating.
A statement from Bainbridge followed thereafter in which he described a Badger Game that took place upon a visit to South-East Asia in 2015. Bainbridge claimed he had attended a gathering one night with some people he did not know. He met a woman, drank heavily and remembers little else. In the morning, two men presented him with footage captured the night before. He must have at least been grateful that no pigs were involved.
“Following the incident, due to this captured content I have been the subject of a sophisticated, continuing and recently escalated extortion,” claimed Bainbridge.
“After paying my extortionists, I sought advice from a London-based threat assessment agency and ceased responding to the extortionists’ threats. This resulted in video imagery being released to several media outlets,”
Bainbridge dumped stock following his resignation and it appears that other investors may also have been spooked as trading volume spiked and the share price took a sharp drop.

The lamp shade
But the story did not end there. Some internet sleuthing revealed the distinctive lamp shade appearing in the leaked footage bore a strong resemblance to the lamp shade in the Melbourne home purchased by Bainbridge in 2020.
It appeared that Bainbridge may have misled journalists. Not only did it appear that the footage may have been filmed in his home, but it also appeared to be much more recent than 2015.


LRK had already announced at its AGM that Bainbridge would move on as CEO long before this saga had commenced. The recruitment will now have to be brought forward but the need for a replacement was already present in the collective consciousness of the board. In the interim, board member and former Bellamy’s CEO, Laura McBain has been given the role of interim CEO.
The story has petered out but questions remain over who leaked the footage and to what end. Alas, this is a Harry Potter themed accounting blog, not a gossip column so let us turn to the balance sheet.
Asset backing
LRK has approximately 2 million litres of whisky sitting in barrels. In the half year accounts, LRK’s whisky inventory was valued at $22,060,642. Accounting standards require that the whisky inventory be valued at the cost of making the whisky rather than using a forecast of the whisky’s future sales value. This means that in reality, the value of the whisky on the balance sheet may be understated compared to its likely sales value.

LRK has stated that the value of whisky at maturation may be $216 per litre. Applying this figure to the 2 million litres of whisky sitting in barrels, we get a value of approximately $435 million. This figure does not take into account the time value of money, any selling costs and perhaps most importantly whether there is demand for this much of Lark’s product. This is a huge number nonetheless when considering the current market cap of the company of $272 million and could be seen as strong asset backing.
While the badger game saga has damaged the share price, it has caused little change to the fundamentals of the company. The success of the company going forward will more likely be linked to the consumption of alcohol than the consumption of drugs.
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