Mega cashed up in pre-Xmas rights issue

  • 06/01/2016
Mega was launched by Kim Dotcom in 2013 to replace his Megaupload empire (Getty)
Mega was launched by Kim Dotcom in 2013 to replace his Megaupload empire (Getty)

By Paul McBeth

Minority shareholders in Mega were further diluted in a pre-Christmas $7.4 million rights issue largely bankrolled by its two biggest investors, which has left the file storage and encryption firm flush with cash heading into 2016.

The Auckland-based company sold 2.01 billion shares at less than 0.4 of a cent each on December 23 in a 50-for-one rights issue, according to documents filed with the Companies Office.

The capital raising was backed by Mega's two biggest shareholders - Beijing-based Li Zhi Min and Auckland-based Yang Jianhong - who injected $3.9M and $2.1M respectively.

Li now owns 52 percent, while Yang's stake has increased to 29 percent.

Li and Yang have stumped up about $15.2M of the $17.5M raised over the past six months, paying $13.135 a share when they first joined the share register, before participating in a two-for-one rights issue at $1.79, then two 50-for-one issues at 7 cents and 0.4 of a cent in November and December.

In August, Mega said it had 22 million registered users and was adding new users at a rate of about 1.5 million a month. That was in spite of online payments firm PayPal and credit card firms Visa and MasterCard refusing to process transactions for Mega over claims its services weren't lawful, a view the file storage firm rebutted.

The rights issue was taken up by 11 of the company's 20 shareholders, and coincided with the addition of three new investors - Liu Gongjun, Gao Meirong and Gumdigger Holdings - and the departure of Consul Investments, a unit of an Auckland-based private equity and investment banking group which had been Mega's third-biggest shareholder.

Gumdigger, an entity owned by Auckland property developer George Hunter, is now Mega's third-biggest shareholder with 8.4 percent.

Mega was launched by Kim Dotcom in 2013 to replace his Megaupload empire, which was frozen after his high-profile arrest in Auckland at the behest of the US federal government in early 2012.