Finweek English Edition - - Cover -

THIS MO­BILE BILL­BOARD com­pany raised a cool R28m from pub­lic in­vestors be­tween Septem­ber 2003 and April 2005, with the last share is­sue (at 80c/share) giv­ing the com­pany an in­ferred val­u­a­tion of more than R60m.

But at the time of MEM’s sale in Septem­ber 2006 (for just R3,5m, to its for­mer MD), the com­pany’s au­dited fi­nan­cial state­ments showed not even R1m had been mus­tered in sales be­tween 2004 and 2006.

MEM pro­vided early ev­i­dence that un­listed ven­ture cap­i­tal val­u­a­tions – es­pe­cially the pric­ing of share pitches to the pub­lic – were un­re­al­is­tic and based on blue sky po­ten­tial rather than fun­da­men­tals. MEM share­hold­ers had no choice but to ac­cept a res­cue pack­age that saw Glob­alJewel (see sep­a­rate re­port) rev­ers­ing its op­er­a­tions into what was ba­si­cally a shell com­pany.

It’s prob­a­bly worth re­peat­ing some of the cor­re­spon­dence about MEM that em­anated from the desk of ven­ture cap­i­tal fund­ing spe­cial­ists StratEquity (a divi­sion of the JSE-listed StratCorp). StratEquity – which, of course, earned a com­mis­sion on ped­dling any MEM shares – noted: “The prod­ucts that MEM are launch­ing have lit­tle or no com­pe­ti­tion with an over­whelm­ing mar­ket ac­cep­tance. If one looks at the mag­ni­tude of the mar­ket and the (re­al­is­tic) profit fore­cast, the po­ten­tial for MEM as a win­ner is quite clear…”

StratEquity pointed out that the fore­cast earn­ings in the prospec­tus up to Fe­bru­ary 2006 could re­sult in a share price of around 400c/share (at a price:earn­ings of 10 times) based on head­line earn­ings of 39,91c/share in the year to end-Fe­bru­ary 2006.

Yeah, right… .

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