HELL TO PAY
Shareholders burn after being tempted into unlisted venture capital schemes
IT’S BEEN 12 YEARS since the first unlisted venture capital projects pressed the purses of public investors but – finally – the ugly and painful truth has emerged about this much-hyped investment segment. Essentially, unlisted venture capital projects – and we’ve seen at least two dozen contenders since the late Nineties – were punted as portfolio enhancers for well heeled and sophisticated investors that could afford to take a higher than usual risk.
The first projects were punted by Prestige Ventures in the late Nineties and contenders included Essential Waters, Jabulani Tourism & Leisure, Penta Diamonds, John Daniel Containers, Pirate Snacks, Reinet Distillers, Agave Distillers, Askari Mining, Primary Paints, Supertow International, Nexus, Neologic and SA Organics. Later, we saw projects such as Zagal Diamonds, Orbis, APMI Holdings, Mobile Events Marketing, GlobalJewel, Garek, Wealth 4 U, Global Call Centre Solutions (GCCS) and Mayfair Mining.
To date, not one of those projects can prove a tangible return of any sort to shareholders. Many simply snuffed it and the few that managed a listing quickly withered away (Essential Waters and Irma Envirotec) or were left for dead (John Daniel Holdings and Beget Holdings).
Because sophisticated investors quickly saw through the promises of high returns from weird and wonderful venture capital projects, much of their aggressive marketing effort was eventually aimed at unsophisticated investors. Participants were often teachers (especially those looking to grow retrenchment packages), farmers and doctors – often cold called by share peddlers promising superb returns from a limited offer investment. Listen to the podcast on Fin24.com