New Partner Lights Up Spike Shares
Sydney Morning Herald
Thursday November 30, 2000
Spike Networks shares surged by 50 per cent yesterday after it announced an $11 million investment by little-known Hong Kong e-commerce services provider and dot com incubator, Techpacific.com.
Under the deal Hong Kong's fallen Internet angel, Pacific Century CyberWorks, will pull out of Spike CyberWorks, the Web design business it jointly owns with Spike.
PCCW has sold its 30 per cent stake in the business to Techpacific.com, in return for Techpacific shares.
PCCW, which paid $23.3 million for the stake in June is understood to have swapped it for a 4.5 per cent share of Techpacific worth less than $7.5 million.
Techpacific's shares have lost almost three-quarters of their value since listing on Hong Kong's Growth Enterprise Market in April.
For its $11 million investment $7.5 million in cash and $3.5 million in guaranteed revenue Techpacific.com will get 51 per cent of SpikeCyberWorks, with the remainder owned by Spike.
SpikeCyberworks will close its Hong Kong office and merge its Hong Kong operation with Techpacific.
Whereas PCCW had been mostly a passive investor, Techpacific would actively supply support and e-commerce services, and about six staff, said Spike's chairman, Mr John McGuigan.
``[PCCW] is moving from a direct interest to an indirect interest.
``PCCW and ourselves looked at what SpikeCyberWorks needed to do to continue to develop its business in the region and we were in agreement that Techpacific could be somewhat more focused on the business, given all the diversions that PCCW have at the moment."
PCCW's share price has tumbled in recent months along with other Internet companies, affecting its ability to make deals.
In October it was forced to renegotiate an investment deal with Telstra under which it got less money and gave up control of the mobile phone operations of Hong Kong Telecom.
PCCW has also seen the value of its other dot com investments fall.
PCCW will retain its 5 per cent stake in Spike Networks and its option to buy another 11.3 million shares at $1.45 each. However, it had effectively given up its option to buy a further 20 per cent of Spike CyberWorks for $31.2 million, Mr McGuigan said.
Spike CyberWorks did not have the $11 million ``earmarked" for anything, Mr McGuigan said.
However, it would not be needed for working capital, as the company had enacted a plan to become cash neutral by mid next year. Instead, Mr McGuigan indicated that Spike CyberWorks was watching the market for good value acquisitions.
Spike Networks gained 7c to close at 21c a 50 per cent gain, but still far below its February high of $3.99.
© 2000 Sydney Morning Herald
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