WELLINGTON, New Zealand – Mega Ltd., the Internet file-storage company launched last year by indicted entrepreneur Kim Dotcom, announced plans Tuesday to list on New Zealand’s stock market.
Documents filed with the stock exchange put Mega’s value at 210 million New Zealand dollars ($180 million), although it will be investors who ultimately determine the company’s worth once trading begins.
Mega plans to achieve the listing through a manoeuvr known as a reverse takeover, using a small company that’s already listed on the exchange as a vehicle. Chief Executive Stephen Hall said he hopes trading will begin in early June.
The flamboyant Dotcom was born Kim Schmitz in Germany before legally changing his name. He founded the file-sharing site Megaupload, which became wildly popular.
He moved to New Zealand and was living in a rural mansion when dozens of armed law enforcement officers stormed his home in a dramatic 2012 raid, arresting him, shutting down his site, and freezing his bank accounts. He spent a month in jail before being released on bail.
U.S. prosecutors accuse Dotcom of racketeering by facilitating the widespread illegal downloading of songs and movies, and they are trying to extradite him and his colleagues to face trial in the U.S. The extradition hearing has been delayed several times and is now scheduled for July.
Dotcom argues he can’t be held responsible for those who chose to use his site for illegitimate purposes.
Dotcom stepped down as a director of his latest venture in August, although wife Mona Dotcom continues to own 26.5 per cent of Mega through a trust, according to company records.
Mega offers services similar to Dropbox and Google Drive, saying one point of difference is the high level of security it offers through encryption.
In documents filed with the stock exchange, Mega said it has 7 million users who have stored 860 million encrypted files, and it plans to release new encrypted chat, video-conferencing and email services.
U.S. prosecutors, who have declined to comment on the case, have previously pointed to promises Dotcom made in his bail application that he wouldn’t reactivate Megaupload or start a similar site before the extradition case was over.
Dotcom used Twitter Tuesday to comment on the listing plans, writing: “Indicted. Raided. On Bail. All assets frozen without trial. But we don’t cry ourselves to sleep. We built #Mega from 0 into a $210m company.”
A reverse takeover is favoured by some companies as a way to save time and money from a more traditional initial public offering but can involve less regulatory scrutiny. In a guidance note, the NZX stock market says such “reverse” or “backdoor” listings are allowed but that it tries to ensure adequate disclosure standards are maintained.
Under the plan, listed company TRS Investments will buy Mega and become 99 per cent owned by Mega shareholders. TRS will then rename itself Mega.
TRS shares, which had been trading at a fraction of a cent, were up 900 per cent Tuesday after the announcement to NZ$0.01.
A major TRS shareholder is Paul Choiselat, who faces charges of market manipulation in Australia in relation to his previous work there as a director of two listed companies.
Mega Chief Executive Stephen Hall said those charges predate Choiselat’s involvement with TRS and Mega.
“It’s not relevant to this business,” he said.
Hall said Mega has grown rapidly in part because people are increasingly concerned about online security and government snooping. He said the company’s growth has generated significant interest from potential investors, although the listing is not designed to raise capital.
Dotcom last week lost a ruling in New Zealand’s Supreme Court as part of his legal battle to try and avoid extradition. He was seeking full disclosure of the U.S. evidence against him at the extradition hearing, but the court ruled a U.S. summary of the case would suffice.
He’s also planning this week to begin registering members of his nascent Internet Party in order to contest New Zealand’s September general elections. Under New Zealand electoral rules, a party must have 500 paid members before it can contest the election.