Eventures Plans Backdoor Listing Via Merger With Estar
Sydney Morning Herald
Friday February 16, 2001
The local arm of dot com incubator eVentures is planning a backdoor listing on the Australian Stock Exchange via a merger with floundering Internet brokerage eStar Online Trading.
Under the deal eVentures, a 50-50 joint venture between News Corp and Softbank, will sell its main business, email marketer MessageMedia Australia, to eStar for $8 million in eStar scrip. EVentures will invest a further $8 million in eStar, which will be renamed eVentures Holdings.
Softbank and News Corp will each own 23.5 per cent of the new company, while eStar shareholders will retain 53 per cent.
EVentures has had a tough time in Australia since setting up here in September 1999. Its first business, online mortgage provider E-Loan, has failed to find many customers while its Internet retailer Buy.com imported from the US shut after just six months.
``I have been spending some time looking at the best way forward," said eVentures chief executive Mr Andrew Isles yesterday. ``We looked at a number of options and believe this is clearly the best option given current market conditions."
The future of the eStar broking service under eVentures is uncertain. EStar managed only $13,000 in sales in the December quarter while burning through $1.9 million. It would require a large marketing investment to compete with heavyweights such as Commonwealth Securities, Etrade and Charles Schwab.
EStar founder Mr Albert Wong insisted the brokerage would continue under the same brand name, even though he was stepping down as chief executive to concentrate on his investment service Barton Capital (which owns about half of eStar).
``There's every reason why eStar will continue," Mr Wong said. ``I think our loss was quite small compared with other dot coms. We are working towards breaking even in the current financial year."
But Mr Isles would not commit to the brokerage's future. ``We're going to review it and make a recommendation to the new board."
The real value of eStar, which is chaired by former NSW premier Mr Neville Wran, is its cash reserves of almost $13 million.
The combined entity will have a war chest of $21 million to pursue venture capital opportunities.
E-Loan is likely to partner or merge with a traditional mortgage lender.
The business had low revenue but a strong technological platform, Mr Isles said.
Asked about Buy.com, which has withdrawn from all non-US regions, Mr Isles said simply: ``There are more self-appointed experts in online retailing than there are customers."
Mr Wong said he had been canvassing ``other opportunities" for eStar since November.
``Since listing last year the online share trading space has become very crowded and we've had the tech market crash and attitude toward online trading ... has become negative, which is why our share price has been marked down so heavily."
EStar has never traded above its 50c issue price since listing last August. Yesterday it gained 3c to 16.5c.
© 2001 Sydney Morning Herald
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