VMob back-door listing has merit if Asian markets pay off

Wednesday 1st August 2012

VMob's proposed back-door listing on the NZAX has merit provided the smart-phone voucher application software firm can tap Southeast Asian markets and secure more funding to get it past the start-up phase, according to the independent adviser's report.

The Auckland-based tech start-up is eyeing a listing via shell company Velo Capital to secure another $1.4 million in capital to get it through its unprofitable early years. It has already sold $1 million of notes which will convert to shares if the deal goes ahead.

Velo Capital's independent adviser WHK says the reverse listing has merit as it presents an opportunity for Velo to engage in a future business activity, which in turn will offer shareholders a potential increase in their investments. It also gets around Velo having to turn to shareholders for capital to keep its listing, and offers greater liquidity in trading.

The adviser's report gave some caveats, saying the merger will dilute investors' holdings, and expose it to the risks associated with VMob and the uncertainties on whether it will achieve its sales targets. The merger also runs the risk that VMob won't be able to raise more capital.

Shareholders in Velo will vote on Aug. 23 in Auckland on whether to approve the deal that will pay $100,000 in cash and issue 609 million shares at 0.7 cents apiece for the tech start-up. That values the deal at $4.36 million, within WHK's valuation range of $3.52 million to $5.6 million

VMob, formerly VoucherMob, was set up in 2010 by Scott Bradley, and has attracted McDonald's, Dominos, Hoyts, Bakers Delight and Civic Video to its platform.

The company posted a loss of $699,000 in the 12 months ended Mar. 31, its first full year of trading, on operating revenue of $28,000. It's seeking to break into three Southeast Asian markets, which it forecasts will grow its revenue base to $16.6 million by 2014/15, giving it free pretax cash flow of $13.1 million.

WHK said no fixed contracts had been secured at the time of its report, though negotiations were at advanced stages with four telecommunications providers, and a memorandum of understanding had been executed with Telkomsel Indonesia subsidiary MetraNet PT.

Bradley told shareholders two memorandums of understanding had been entered into with significant telecommunications companies. Two VMob subsidiaries are in the process of being set up in Indonesia and Australia, according to a company profile.

VMob attracted Xero chairman Philip Norman to leads its board, and Velo shareholders will be asked to approve his appointment to the new board of the merged entity, along with Bradley.

The shareholders will also vote on whether to approve an employment share scheme, allow the issuance of 200 million shares for a further capital raising, and to issue shares to the VMob convertible note holders.

Velo shareholders last year agreed to sell its media assets for some $744,000, which let it pass on $1.4 million of indebtedness. The shares last traded in April at 3 cents apiece.

The entity began life in 1984 as an Australasian horse breeding company, before being restructured in 1999 into a venture capital fund focusing on high growth tech businesses.

It was used as a shell to list Digital Disc Holdings in 2003, before changing its name to Media Technology Group, and then Forge Media Group.

BusinessDesk.co.nz

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