Mega-question over NZX listing
The NZX will not say whether the criminal indictment of Kim Dotcom could prove a stumbling block in the proposed sharemarket listing of his online storage service, Mega.
Mega chief executive Stephen Hall said he hoped Mega would float on the NZX by the end of May through a "backdoor listing" achieved by a reverse takeover by "penny stock" TRS Investments.
The NZX pointed out a year ago, when Mega first mulled listing on the exchange, that it was a "privilege" and not a right. Its rules state it will not facilitate the listing of companies whose directors have a history of "unsavoury practices" but it is able to exercise discretion and cannot act "capriciously".
The NZX would not clarify whether and how the rule might apply to what is technically a change in the business of an already listed entity.
An NZX spokeswoman said it would "not comment on specific issuers or their proposals" and would not say whether the association of Dotcom with the business might be an issue.
However, she said that, when considering whether to approve any notice of meeting relating to a transaction that would change the essential nature of an issuer's business, the NZX would take into account "all relevant information available to it" and whether there was adequate disclosure for shareholders to appraise the transaction. That appears to leave open one possible avenue for intervention.
Although Dotcom is not a director of Mega, former Megaupload chief technology officer Mathias Ortmann, who was charged alongside Dotcom on copyright and racketeering charges in 2012, is a director. Hall said there had not been an announcement and it had not yet been decided who the company's directors would be if the listing went ahead.
Hall said he was not aware of any regulatory obstacles to the backdoor listing "but you never know".
It would give ordinary sharemarket investors the opportunity to buy into Dotcom's new business, which was founded in January last year, a year after the seizure and closure of Megaupload by United States authorities.
Mega claims 7 million registered users, though Hall said only tens of thousands of them were paying customers. The company had no immediate need for fresh capital and had no immediate plans to offer new shares to the public, he said.
The listing would, however, give Mega's existing shareholders, who comprise interests and associates of Dotcom, and a handful of backers, the opportunity to sell down their holdings. Mega would be valued on paper at $210 million under the terms of the transaction, but the real value of the firm would be determined by its share price once trading commenced.
"As far as I am aware, shareholders are predominantly here for the long-term ride and aren't looking to cash out quickly," Hall said.
TRS, which had a brief to invest in small stocks on the Australian stock exchange, was valued on the NZX at $2m before the backdoor-listing announcement.
Hall said TRS' existing investors, some of whom had shareholdings that were too small to be marketable, might be given an opportunity to buy more shares in Mega through a share-purchase plan.
A subplot is that TRS Investments' controlling shareholder, Paul Gerard Choiselat, is fighting market-manipulation charges in Australia. The Australian Securities and Investments Commission (ASIC) laid 25 charges relating to market manipulation against Choiselat in December. The case is due to be heard next month.
Choiselat is the controlling shareholder of TRS through his companies Beconwood Securities and Beconwood Superannuation, which together own 73 per cent.
The ASIC charges relate to his previous directorships of ASX-listed companies Q Ltd and Jumbuck Entertainment.
Twenty of the charges allege the disclosures of his interests in the companies were false as they excluded interests held through various overseas entities registered in the British Virgin Islands and managed from Hong Kong. A further five allege manipulation of the share prices in Q and Jumbuck.