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.