SLX3 investments are obscure
The price of shares in the publicprivate broadband company Smartlinx3 has plummeted by 80 per cent, and with it the value of a company that has received public investment of perhaps as much as $2.5 million.
SLX3’s private investors also received a Government grant of $2.4 million to provide broadband infrastructure and services that to this day are not publicly accounted for.
Secrecy surrounding SLX3 has kept the public in the dark about just how much each four public investors: Hutt Mana Charitable Trust (HMCT), Hutt City, Upper Hutt and Porirua Councils have really invested.
The decline in book value is not only the result of the general economic downturn.
However, the Audit Office has just confirmed to Hutt City Council that its $465,000 investment in SLX3 is now worth only $194,000.
Earlier this year, HMCT’s $825,000 in SLX3’s shares were devalued to just $145,707 due to the company’s losses.
Upper Hutt City Council was not able to immediately say what its share value or possible decline was. Porirua City Council said it did not have any information on SLX3 at that level of detail in its public reports.
Shares that public investors once purchased for up to $200 each – which never made a profit and only became cash-flow positive after drastic cost-cutting and repeated public cash injections – dropped to just $20 a share at the most recent council purchase earlier this year.
Yet the councils continued injecting capital as recently as March of this year, when they spent another $90,000. HMCT declined to join them. The deal was supposed to be contingent on SLX3 raising $320,000 in the issue. It is not known whether they did.
SLX3 last month asked the public investors for another $ 500,000 to pay back a loan to the failed South Canterbury Finance on which it had defaulted but got continuances through the receivers of SCF. The company suggested that the councils could take over the servicing of the debt.
It is not known how the other three investors responded, but HCC said no.
Councillors have said SLX3’s affairs are so secretive it is impossible to have proper public oversight of the investments.
And the Audit Office apparently agrees. Its report to HCC said that SLX3 should have provided its 2010 annual report, due in June, by now, but hasn’t.
The auditor made reference to previous council papers about SLX3’s ‘‘positive cash flow’’, but he questioned whether there was any evidence of that.
By mid-2010 SLX3 was so reduced in income that it laid off all its staff and contracted its operations to CityLink, the Wel- lington pioneer broadband company.
The councils that were providing backing said they were giving the $270,000 additional funding in SLX3 on the promise that it would ensure SLX3’s place in the Government’s ultra-fast broadband initiative. But as reported recently, there is no chance of that.
Last month there were calls by Hutt City councillor Max Shierlaw, a long-time critic of SLX3 and council involvement, for the company to become a councilcontrolled organisation after the resignation of HMCT’s nominated director, Leo Austin.
Mr Austin said there are ‘‘some matters’’ the shareholders had to sort out.
HMCT has now appointed a replacement, Tracy Abbott, of Wadestown, who is described by HMCT chairman Ian Hutchings as having been an adviser to the trust.