Mega reverse takeover lifts penny dreadful
Tuesday 25 Mar 2014 7:12 p.m.
Kim Dotcom (Reuters)
Shares in penny-dreadful shell company TRS Investments have soared to nearly one cent after Kim Dotcom's Mega Ltd announced plans for a backdoor listing on the NZX.
The reverse takeover would value his data storage and encryption firm at $210 million.
TRS stock rose to one cent, the highest in seven years, from 0.1 cent, valuing that company at about $11.1m.
TRS said it would buy 100 percent of Mega by issuing 700 million new shares to Mega shareholders at 30 cents apiece, after undertaking a 148 for one consolidation.
Mega shareholders would own 99 percent of TRS, which would adopt Mega as its name.
Mega had no immediate plans to raise new capital although it may offer a share purchase plan for existing TRS investors to allow them to build a meaningful stake after their holdings are diluted, chief executive Stephen Hall told BusinessDesk.
"Mega's fundamentally a growth company, and we do consume cash, so there's a possibility of raising capital," Mr Hall said.
The company had always planned to list in New Zealand to cement its place in the local corporate community and had made the approach to TRS.
A back-door listing offered "time and cost efficiencies," he said.
The news sparked record volume of trading in TRS shares, with some 42.6 million shares, or 3.8 percent of the company's stock changing hands.
Mr Dotcom staged a global media launch for Mega in early 2013 to replace Megaupload, his previous venture which was shut down in a US-led operation that alleged the file-sharing firm and its owners had committed mass copyright infringement and money laundering of more than $US500m
Pacific Fibre co-founder and internet commentator Lance Wiggs said the listing will give Mega the opportunity to bypass the traditional investor community, which may be wary of the company and its high-profile founder, and attract funds directly from the public.
"This is a good thing, because we need to broaden the investor community in New Zealand," Mr Wiggs said.
"The big thing hanging over this is really Kim himself - he's obviously their best asset, but also the biggest liability."
Mr Wiggs said it was hard to judge the investment proposition until more details were made public.
The deal needs approval from TRS shareholders, and is conditional on regulatory approvals.
Mr Hall said Mega was aiming for a May completion, although the timeline could slip.
TRS's biggest shareholders are Paul and Lynette Choiselat, who own 73 percent of the existing shares.
Melbourne-based Paul Choiselat is facing 25 charges relating to market manipulation and concealing his interests in listed companies, laid by the Australian Securities & Investment Commission in December.
Mr Dotcom stepped back from a hands-on role at Mega last year, resigning as a director in August to focus on his extradition proceedings, music streaming website and political aspirations via the Internet Party.