By Giles Parkinson
Sydney view
One of Australia's most controversial high-tech companies came to an unsavoury end last week when Formulab Neuronetics - the proponent of artificial intelligence - was put in the hands of an administrator.
The story of Formulab - a bright idea that couldn't get acceptance from the market - could have been quite typical, particularly in Australia where new ideas often get a bad reception.
But the story of Formulab, and particularly its founder, Tony Richter, is no ordinary tale.
For a start, Richter is a self-described eccentric. He grew up in poverty in Western Australia, lived in a tent as a child, left school at 13 and ended up as an industrial psychologist with a thriving company-turnaround business.
But his passions lay elsewhere: he was fascinated by ancient civilisations, collected antiques and spent years trying to perfect his machine-based reasoning machine.
After 15 years of development Richter claimed his computer to be "the closest thing to a human brain in machine form", and could be adapted to voice messaging systems, speech recognition, on-board vehicle management systems, heart pacemakers, defence, transport scheduling, factory production and artificial nervous systems.
He had hoped to bring his technology and the company he founded onto the stock market in 1987, but the crash two weeks before his proposed listing put paid to that idea.
All the same, when the company did float in 1995 it was embraced by the investment community and raced to a market capitalisation of more than $400 million.
That put Richter straight into the BRW Rich 200 list with an estimated net worth of at least $90 million, and possibly more than $200 million if options were taken into account.
The company's share price peaked in December 1996 at the height of an intense publicity campaign about the Richter Paradigm, but an inexorable share slump began the very day the technology was presented to US investors in New York.
The stock fell 13 per cent after the presentation received a mixed reception after some tough questioning by US fund managers. The seeds of doubt had been sown, and the freefall in the shares had begun. Once the market smells fear, there is no turning back.
Formulab was racked with numerous key departures in the past 12 months to the point where Richter, now living in Singapore, was left as the only director.
The share price plunge continued to the point where they were suspended in mid-March this year with a last traded value of just 1.9 cents.
Finding a reason for what went wrong could be a fascinating exercise. Finding out if there is any future for Richter's mechanical brain could be more problematic.
Harsh words from the Americans
The bevy of American CEOs gracing the country's boardrooms have been more or less polite about the business acumen and practices of their host nation, but it's hard to keep a lid on fast and hard talkers for too long.
George Trumbull's spat with fellow expat Nick Steffey over the bitterly contested GIO bid became all too much for the AMP supremo, who launched into an extraordinary tirade against Australian businessmen last month.
He accused some of them of being "fair weather Charlies" who talked "bullshit" to US fund managers.
Of course, George was quite hot and bothered about some unkind remarks made in his direction at the closure of the $3 billion bid, which may explain some of the emotion in his words, although he is a straight talker.
On the other hand Greg Bundy, the US executive sent down under to establish Merrill Lynch Australia three years ago after the purchase of McIntosh Securities, may well have returned to New York in a cone of silence, but last week just had to get something off his chest.
What has been bothering him for the past few years has been the practice of many Australian brokers of giving sizeable share allocations in new floats to their own staff, even when that means their institutional clients get cut back.
The practice is outlawed in the US, but continues in Australia because of a grey area of the law which covers listed companies, but not necessarily those in the throes of going public. Bundy, though, reckons it is simply a matter of ethics.
So next time your application for shares in a new float gets cut back it might be worth inquiring of the broker how many of the shares, in the parlance of Mr Bundy, went up the stairs.
* Giles Parkinson is deputy editor of the Australian Financial Review
When the market smells fear there's no turning back
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