Kim Dotcom’s cloud storage business Mega Ltd has announced plans to go public with a NZ$210 million (£109m) backdoor listing on the New Zealand stock exchange, which will open the firm up to a whole new level of scrutiny.
Backdoor listings are usually enacted by smaller firms looking to go public without the cost and hassle of an initial public offering.
As such, Mega today said it will acquire already listed shell company TRS Investments in a reverse takeover. This means TRS will buy 100 per cent of Mega for NK$210m and issue 700m new shares in TRS to existing Mega shareholders at 30 cents each.
TRS will also undertake 148 for 1 consolidation of its share capital, leaving Mega shareholders owning 99 per cent of TRS, which will then change its name to Mega.
It’s an entirely above board but uncommon method of listing which means the company involved – Mega – doesn’t have to produce a prospectus or any other financial information before the deal has been completed.
This may be the reason for the move, although once listed, the company will have to abide by normal NZX rules which mandate transparent financial accounting.
Backdoor listings are not known for generating large sums for the firm involved, partly because of the lack of available information for investors and the high risk associated.
There were no more clues from Mega about the reason for the listing or the timing aside from the following bland statement from CEO Stephen Hall:
The rapid global growth of Mega has generated significant interest from potential investors. Listing on the New Zealand Stock Exchange will allow investors to participate in the on-going growth of Mega.
The firm claims around seven million registered users for its encrypted cloud-based storage products.
However, controversy is never far away from Dotcom.
One of the major shareholders of TRS, Paul Choiselat, is facing 20 charges laid by the The Australian Securities & Investments Commission last December including five of market manipulation, according to the New Zealand Herald.
Founder Kim Dotcom resigned as director of the company in August last year to focus on fighting his extradition to the US, where he’s wanted on copyright infringement and other charges related to his now defunct Megaupload site that could lead to many years behind bars.
Dotcom is not listed as a shareholder in Mega but his wife Mona owns 26.5 per cent of the company according to Companies Office docs seen by Bloomberg. ®