MOBILE EVENTS MARKETING
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… .