New Mega constitution paves way for listing after backdoor route closed
Mega has updated its company constitution, making it easier for the file storage and encryption firm, which has more than 18 million registered users to list after a failed attempt to join the NZX through a back-door listing earlier this year.
The company filed a new constitution to the Companies Office on July 6 which added specific provisions for listing the company, stating that the "board shall take all reasonable steps to prepare the company for listing on a recognised stock exchange" and setting share sale restrictions for a maximum 12 months from the date of joining a bourse unless the board determined otherwise.
Mega chief executive Graham Gaylard said the new constitution would make it easier for the company to list but declined to comment on the time frame for going public.
The company's website is already geared up to provide shareholder updates, with a page devoted to shareholder reports "when Mega becomes a publicly held company registered on a recognised stock exchange."
In May, the Auckland-based company aborted plans to list on the NZX via shell company TRS Investments after a series of delays in gaining approval to go ahead with the deal. The transaction would have seen TRS acquire Mega for $210 million by issuing 700 million shares at 30c apiece to Mega shareholders once a share consolidation was completed. Mega shareholders would then have owned 99% of TRS, which would have change its name to Mega.
The constitution also adds new provisions for the board to issue shares, including pro-rata issues to shareholders, small issues of up to 15% of Mega's stock in a 12-month period, and an employee share scheme not exceeding 6% of shares on issue at a price that's the greater of either the immediately prior issue or giving Mega a 'pre-money' valuation of $95 million.
Mega was launched by internet entrepreneur Kim Dotcom in 2013 to replace his Megaupload empire, which was frozen after his high-profile arrest at the behest of the US federal government. He has since stepped back from the firm to fight his extradition and to bankroll the Internet Party, which failed to gain seats in Parliament at last year's general election.
The company has 16 registered shareholders, of which director Shen Zhao Wu is the biggest investor with almost 26% of Mega. Mr Shen is a regular donor to the National Party through his Contue Jinwan Enterprise Group, and increased his stake in Mega in a share issue amounting to 6.7% of the company in February.
The next biggest shareholding of about 16% held through TEY Trustee Ltd is frozen by a restraining order over the assets of Auckland businessman William Yan. Wolf Ortmann is the next biggest shareholder with 15.6%, followed by Dotcom's estranged wife Mona, via Coatsville Trustee Services, with 15.5%.
Earlier this year, PayPal stopped processing payments for Mega after NetNames, a US group with funding from the Motion Pictures Association of America, claimed it was among companies whose services were not legitimate or legally compliant.
Mega rebutted the claims with a legal opinion by international law firm Olswang, which found no evidence that the bulk files stored by Mega infringe on copyright holders, the firm's target audience is different from typical 'cyberlocker' users as its services wouldn't benefit them, that the platform isn't attractive for mass distribution and that its business model is different from 'cyberlockers'.
The company is expanding its product offering to include encrypted audio and video calling, now in beta mode.