IndraNet shareholders in it for the long term

By Chris Hutching

Friday 26th October 2001

Any of the Mum and Dad investors who expected to make a quick buck out of IndraNet Technologies' recent $4.5 million public share issue will have been disappointed with a share trading scheme that fixes prices and places them in a queue.

Questions about disclosure relating to a share-trading facility were raised by the Australian Securities & Investment Commission (Asic) when it recently placed an initial stop order (subsequently lifted) on IndraNet's second public share issue in Australia seeking $A4.5 million.

A share trading company called Global IteX Systems was set up and Companies Office records list IndraNet Technologies as the sole shareholder and IndraNet director Michael Kain and chairman Russell Fitts on the board.

But Mr Fitts said yesterday he and Mr Kain were no longer directors and it would be improper from the view of securities legislation for the company to be so closely involved. Instead, a company associated with IndraNet managing director Louis Arnoux in his own private capacity is now the contracting shareholder along with other parties, including the chief executive of the new company, Barry Knutsen.

Mr Fitts said IndraNet investors had taken up their investment as a long-term hold and the managed share trading was appropriate for a company at IndraNet's stage. Generally it was only a minority of trading shareholders in any company who set the price, he said, suggesting the majority should not be disadvantaged in this way. Some 85% of IndraNet is owned by a small group of founder shareholders, including directors.

"Under the Global IteX system people enter a queue, and when trades can be facilitated they take place."

One of the problems facing shareholders might be that Global IteX is trying to fix the price at $1.20 a share to equate with the Australia issue at $A1 a share, while the recent $4.5 million issue to New Zealanders was at $NZ1 a share.

Meanwhile, Mr Fitts said the second Australian capital raising was going slower than expected but it was open until March next year so he expected the uptake might quicken as the close-off date approached. IndraNet has relied on its own media advertising pitched at retail investors.

Other issues that prompted Asic to place its interim stop order on the IndraNet offer information statement in Australia included questions over estimated costs of developing the company's technology and a statement in IndraNet's advertisements that it was "now entering the commercial stage of production."

Asic thought this was potentially misleading without adequate explanation to investors. IndraNet has agreed to clarify this statement and to omit such statements from any future advertising, assistant director policy and markets regulation Allan Bulman said.

Meanwhile, the compressed-air car IndraNet earlier forecast would be in production in Christchurch by now had been placed on the backburner as IndraNet focused on its core networks developments, Mr Fitts said. But managing director Mr Arnoux had some new plans to advance the company's business ventures.

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