Tech venture embroiled in legal stoush
Christchurch-based technology ‘‘incubator’’ Powerhouse has ousted directors of two of its 25 investee firms, SolarBright and Motim, and plans to sell disputed intellectual property.
But Powerhouse’s own performance has been volatile, its share price continues to fall, and Crown agencies Callaghan Innovation and NZ Venture Investment Fund have suspended seed funding to the company.
Powerhouse chief executive Paul Viney and directors issued a statement saying that only three investee firms had failed in a high risk sector, others had delivered good returns, and they have firmed up governance at all levels.
Christchurch City Council is maintaining its ‘‘hands off’’ stance over Powerhouse as its 22 per cent shareholding value plunges from more than $5 million a year ago to less than $2m.
The council’s economic development arm, ChristchurchNZ, reiterated it is a passive investor in Powerhouse with no plans to seek a directorship.
Callaghan suspended funding following Powerhouse’s liquidation of one of its companies last year, HydroWorks, and it initiated an independent review ‘‘to ensure Powerhouse continues providing incubation services as required under the pilot programme agreement’’, a Callaghan spokeswoman said.
NZVIF has dropped Powerhouse as a co-investor. NZVIF chief executive Richard Dellabarca said he had unsuccessfully opposed Powerhouse’s appointment of Christchurch director John Walley to the board of financially troubled Motim.
NZVIF has14 per cent of Motim. It sought a veto of Walley’s appointment under a shareholder agreement, because of concerns about the interests of all shareholders.
Powerhouse then exercised its right as a 41 per cent shareholder to force the resignation of Motim chairman, John Cunningham, and install Walley.
The pending sale of Powerhouse’s shares in Motim under Walley’s directorship will be for a mix of cash and shares worth about $2m.
Powerhouse has also appointed Walley to replace directors of financially troubled SolarBright, a Christchurch-based developer of lighting products which has ceased trading. Its premises are being advertised for lease, and for- mer director Pat Martin is preparing for a legal fight with Powerhouse over ownership of intellectual property.
Powerhouse has obtained an interim injunction against Martin and his wife Nicola, restraining them from selling SolarBright’s intellectual property.
Martin vowed to fight the injunction. He said he had expected support when SolarBright hit difficulties recently.
‘‘It’s been a nightmare and still is,’’ Martin said.
Directors of some other investee companies have also resigned over disagreements with Powerhouse.
Powerhouse itself has seen the departure of several directors over the past year. Its share price has hit a new low of 21 cents from $1.07 a year ago with a large number of shares sold in recent days.
Powerhouse managing director Paul Viney acknowledged Powerhouse’s earnings were ‘‘lumpy’’.
‘‘Our earnings may be soft in one or two periods and then could be very significant. On average, we would hope for returns to investors of around 20 per cent per annum after all costs.
‘‘Powerhouse management and the board fully acknowledge the loss in company value, caused mainly by the failure of Hydroworks six months ago.
‘‘Powerhouse’s current share price is well below our net tangible asset value and so there exists the potential for investors to benefit by buying shares.’’
His board had identified investments for sale that were ‘‘off model’’ because stakes were too low to influence the companies.
It recently sold a minority stake in battery developer Arc Active for $1.9m, providing Powerhouse with much-needed working capital.
Viney cited the recent successful $6.8m capital raising by investee company Invert Robotics, and Australian Stock Exchange listing of another, CropLogic.
‘‘We’ve announced half a dozen new company formations and I am particularly excited about Hapai Transfer Systems out of Canterbury University research, Silventum from the Otago Dental School, and HotLime Labs in Auckland.’’