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Dotcom’s Mega seeks $210m backdoor listing on NZX via TRS Investments

Mega Ltd, Kim Dotcom's data storage and encryption company, is seeking a backdoor listing on the NZX valuing the firm at $210 million.

Shell company TRS Investments, which has previously been looking at a back-door deal to list Cornerstone Mineral Corp, will buy 100 percent of Mega for $210 million, which will be satisfied by the issue of 700 million new shares in TRS to the existing Mega shareholders at 30 cents apiece, the company said in a statement.

It will also undertake a 148 for 1 consolidation of its existing share capital, leaving Mega shareholders owning 99 percent of TRS and adopt the Mega name. TRS shares were unchanged at 0.1 cents, valuing the shell company at $1.1 million.

The backdoor listing means Mega will gain a place on the NZX without having to release a prospectus or otherwise discose detailed financial information.

Dotcom staged a full-scale global media launch for Mega in 2012 to replace Megaupload, his previous venture which was shut down in a US-led operation that alleged the file-sharing firm and its owners had committed mass copyright infringement and money laundering of more than US$500 million.

Mega says it has around seven million users of its encrypted online storage service, but has been cagey about how many pay.

Former Mega CEO Vikram Kumar told NBR the new file sharing service has "a few thousand" subscribers who have paid for extra storage space (the first 50GB of online storage is free).

As a point of contrast, US-based online storage service Box filed for a $US250 million today. Box boasts 25 million registered users and 34,000 paying organisations.

This week Dotcom and his co-accused, Finn Batato, Mathias Ortmann and Bram van der Kolk lost a bid in the Supreme Court to access US government evidence against them ahead of the extradition hearing.

Mega's existing shareholders include Dotcom's wife Mona, who owns 26 percent of Mega via MD Corporate Trustee Ltd, followed by Wolf Ortmann with 18 percent, and Michael Sorensen via VIG Ltd with 11 percent, according to Companies Office filings. John Schollum, via Hobson Street Holdings emerged as a Mega shareholder this week with a 2.3 percent stake.

Dotcom stepped back from a hands-on role at Mega last year, resigning as a director in August to focus on his extradition hearing, music streaming website and political aspirations via the Internet Party. He doesn't hold any directorships in New Zealand, and his only direct shareholding is in RSV Holdings.

The deal needs approval from TRS shareholders, and is conditional on regulatory approvals.

TRS's biggest shareholders are Paul and Lynette Choiselat, who own 73 percent of the company.

TRS and Cornerstone Mineral Corp ended their talks, with the mining company instead eyeing the new NZX market being touted for small and medium sized companies.


More by Paul McBeth and NBR Staff

Comments and questions

What a joke valuation. I wonder if the NZX will require any details to be published or will it let the unsophisticated investor get sucked in.

yeah the numbers will make real interesting reading on this one

Your right, I was wondering that myself as I suspect Mega's income to be low so these shares would have a huge PE ratio.

They are not offering the shares to the public at this price so the market will set the real price once it lists.. a few cents/share maybe?? The existing minority shareholders may have something to complain about if they get outvoted.

Agree re market will set the price but I fear only the foolish will buy, and the NZX should protect against this. I do understand they will require accounts before the takeover.

Give the majority holder owns 73%, he only needs 2% more to back him and that's if everyone votes. No doubt he will be getting lots of consulting fees on this to justify him accepting this reverse takeover. Again, will the NZX protect small shareholder in TRS. Will the majority shareholder be required to detail his involvement and will he abstain from voting since conflicted?

Tim Bennett and NZX will be rubbing hands in glee at yet another fee opportunity - forget about transparency and protection for investors.

Kim Dotcom and Brent King eh? Might give this one a miss.

I just caught a cab into the office and the driver, a lovely young man from the Phillipines, was already raving about this Mega listing as being a great 'buy'..Now, where's my brokers number......

This is going to be a good one.

Look at who's behind TRS now - 73% shareholder Paul Choiselat.

[See more on Paul Choiselat in Mega backdoor shareholder faces 25 securities charges - Editor]

Every market needs penny dreadfuls to compete with lotto
Our history is filled with personality lists
Sure it looks like a woof woof but it gets people talking about it + maybe then investing in something best suited to their profile rather than consumables.
Who knows one day we may even get a real capital market

John + Bill to invest to leverage up those power company shortfalls - double or quits?

The Wolf of Wall Street would have just loved this one!

Comment of the day. You win the internet for today!

Pleasure Share Watcher. Looking forward to the next entertainment stock.

Looks like the Internet party is about to get a bigger budget.

Interesting timing of the allocation of 46,488,280 options exercisable at $0.002027 per share (announced 5.24pm yesterday).

These are granted in consideration of a loan previously advanced to the
Company by the largest shareholder. Looks like a nice return on investment!