IT Capital worries put wind up investors

By ADAM GIFFORD

IT Capital's recapitalisation plan faces a rocky ride from shareholders at an extraordinary meeting in Auckland today.

Shareholders' Association chairman Bruce Sheppard has written to the Stock Exchange asking that the meeting be adjourned because directors withheld information from share valuers Grant Samuel.

A caller claiming to be involved in the recapitalisation told the Business Herald he had cold feet and was backing out.

The new managers of IT Capital, former PC Direct and exo-net directors Maurice Bryham and David McKee Wright, propose to bring in $2.7 million, including $1.2 million of their own, as well as their interests in three start-ups.

For the purposes of the deal the value of their shares in the target companies - wheeled-boat builder Sealegs, electronic engine developer Conceptual Solutionz and cellphone application company Datasquirt - is set at $5.5 million, the high end of the Grant Samuel valuation.

The new IT Capital shares would be issued at 4c, giving Bryham and McKee Wright 137,500 shares, or 42 per cent.

As Platinum Management, they also get a three-year contract to run the company.

The anonymous caller said he was invited in as a habitual investor, but negative publicity had spooked him.



Other investors would follow his lead, he said.



McKee Wright said he had "picked up vibes" that investors were wavering, but "we have done as much as we can".

If the deal was rejected, he said, "the board of IT Capital need to look for plan B".

Sheppard said the Grant Samuel report circulated to shareholders had significant errors and omissions.

IT Capital's only viable asset is a 42 per cent stake in Deep Video Imaging, which is developing new computer screen technology.

Sheppard said Grant Samuel was given only limited financial projections for DVI, and no detailed financial information for Terabyte and Golden Orb.

It was not told that in May a Vancouver investor, John Proust, made a highly conditional offer to back DVI into a Canadian junior market company.

"The value Proust put on DVI in that deal was up to $100 million.

"That puts IT Capital's DVI shares at $42 million, which is considerably more than the $6 million Grant Samuel valued them at," Sheppard said.

"Even though the offer was highly conditional, that is a document which should have been disclosed to Grant Samuel."

Sheppard said Grant Samuel also got its sums wrong, and even at its low DVI valuation should have valued IT Capital shares at 5.44c rather than 4c.

Grant Samuel director Michael Lorimer said Sheppard had not read the report properly, and the firm stood by it.

"We have not seen or heard anything about this Canadian offer, so we have no idea how genuine it was. It was up to the board to tell us, if they thought it was material."

IT Capital chairman John Robertson said the Proust offer was referred to DVI's management for consideration as part of its capital-raising.

However, "it was a Vancouver listing proposal. It was not a valuation and there was no capital of any substance."

The Market Surveillance Panel said yesterday that it had asked IT Capital about the alleged omissions from the Grant Samuel report.

"ITC has confirmed to the panel ... that the information in question was not, and is not, considered by ITC to be relevant information," the panel said.

Robertson said Sheppard's view that IT Capital should be liquidated was not in the best interests of shareholders.

"We don't need people going out and slagging us when we have brought a very good management team on board. We don't need slagging when we are raising capital," he said.