Tasman Capital IPO

[Tasman Capital]

Thanks Yossarian for starting this thread and to those who have taken the time to check out the offer document.

When we wrote the offer document and had all the various regulatory bodies check it out and fiddle with the wording, I wasn't sure if it still made any sense! But clearly from these posts people are getting it 100% and also seeing the wider opportunites that being a Tasman shareholder presents.

Even Hoop is right in a way, though at first I thought being called an individual who wanted to play with other peoples toys was a bit tough. But in a way that's what the sharemarket is all about, isn't it? By participating in the NZ sharemarket we all get to own a piece of something that someone else has created - a piece of NZ Inc.

I just wanted to join the thread and answer some of the questions raised.

What is a reasonable value we can expect to be placed on our shells? This really depends on how big the company is that wants to list and how much we do for them in terms of placing additional shares and how much of the compliance listing costs Tasman agrees to pay. Doing a listing in the normal way is very expensive and probably prohibitive for the companies the size we are targeting. By using one of our shells it may not cost them any cash at all, just a relatively small dilution in their shares. The number on page 7 of the offer document is not a guess, in fact it may be pretty conservative. Check out Lombard's annoucement to the NZX on 24 August 2005 which details their back-door listing. You'll see that the insolvent Pure NZ shell was valued at several million, a whole lot higher than the several hundred thousand we use on page 7. Added to that, our shells will be cleaner, have stronger shareholders and have a better spread of shareholders.

How much demand is there for listable shells? You should assume that we would not have gone ahead with Tasman unless we had some serious interest from suitable candidates. Added to that, there are always some good private companies or businesses that come up for sale, typically for sale at around 4 times profit.

Some of you have noticed one really interesting feature of Tasman. The reason Tasman thinks that it has the most exciting IPO of 2007 is not so much that Tasman's shares should have some pretty healthy capital gain every time we help list a company, or even that Tasman shareholders will get some free shares in those companies just before they list, but its the fact that we will want to give our shareholders the opportunity to pick up substantially more shares in these companies at pre-listing prices.

For example, take a company that is making a profit of say $2 million. As an unlisted company it might be for sale at say 4 times profit, that is $8 million. Provided these profits proved to be sustainable, it could have a market cap as a listed entity of perhaps say 8 times profit. If profit were expected to grow that multiple could be even higher. In the listing process, Tasman would want to give its shareholders the chance to buy additional shares in a company like this at a price based on the unlisted multiple of 4 times profit.

There are quite a few ways we could do this. For example, we could grant free options along with the free shares at the time the shell is created with an exercise price based on pre-listing pricing and exercisable one year after the company in question has listed. We like the idea of options because this will give time for the market to establish a price for the shares and at that point it would be a no-brainer as to whether to exercise the options. We could also use a rights issue. The interesting thing about a rights issue is that we would want to give all shareholders the opportunity to apply for extra shares, over and above the rights alloted to them, from the rights issue short-fall pool. It's important that our shareholders be given the chance to pick up extra shares besides the ones they got for free because that will really improve the spread and liquidity of the shares once listed.

Lizard, you've made a good observation, this is not so much a capital raising as a shareholder raising. The $500 is almost like joining a giant shareclub that has the unique abiltiy to leverage off the sheer number that belong to it. You are right, we will be wanting to give our shareholders at least a minimum holding in the newly listed companies. That's why our shareholder base is so flat. A minimum holding according to NZX listing rules depends on the actual share price and is not a flat dollar amount, and in the example on page 7 with an assumed share price on $1 the NZX defines a minimum holding at 200 shares which is what you correctly calculate the average Tasman shareholder with 5,000 shares would get this the example.

Paper Tiger, fair comments but our model is not totally like the examples you give. The big difference is that your examples are pure back-door listings. Even though our process has the powerful potential to create value for shareholders in the same way as a back-door listing, it is not actually a back-door listing, it is a compliance listing. It's our job to get companies compliant to list, with a good spread and the requisite number of shareholders. The regulators are not particularly enthusiastic about pure back-door listings but they are more comfortable with compliance listings.

How long will our money last? Remember that we will not only have the $300K from the IPO but the original shareholders also paid 10 cents per share so we will have raised $500K total. Ironically, the more successful we are - with lots of companies to list - the quicker the money will run out - but then our investment portfolio would be looking pretty healthy. If we don't have any listings, then our money will stay in the bank. Director's fees are currently set at $20K per annum and I don't expect that to change for some time. There a not many other fixed costs as Yossarian assumes. We do not employ anybody and we have no leased property. We just use the existing offices of the directors at no cost to Tasman.

Thank you to those who have sent in their applications, good to have you on board.

Joseph van Wijk
Director
Tasman Capital

[Yossarian]

very useful response... you've just about convinced me!

Thanks for taking the time.

[etrader]

Joseph thanks for your informed update downloaded the documents and read through it, i also think it's a good way to get into a pre listing. Have sent cheque, i could blow that on cloths that are worth nothing after 5 minutes so it's an easy entry level. I think as you stated if you keep your overheads low for head office costs and prove to the market after your first clean listing and have 500 happy investors i think you will put to rest sceptics on this compliance listing.


Look foward to hearing how it all goes.

[Parky]

I just dont get this notion of listable shell; creation of a new entity for purpose of listing for a "compliance listing" instead of a pure "back-door" listing.
The prosectus does not state as how it achieves the costs savings, as if this is as stated a "compliance listing" surely the costs involved would not differ greatly from the vendor company's IPO to that of using the Tasman listing transaction.

Why would compliance costs from one IPO differ from another IPO? Is the cost savings coming from Tasman's expertise in listing? (as for the argument of having a clean "shell", given the transaction is purely hiding the mess of the vendor's companies facts into Tasman's derived clean entity would require just as much transparency and other related costs involved as if it was to list on its own?).

I might be going round in circle but my point is usually for back-door listing the documentation required to effect the transaction is more complex than that required for an IPO. How is this any different.

[Hoop]

Joseph, a pleasant surprise post from you. Good on you.
I hope you have started a trend for other companies to follow. Us investors get nervous when we feel ignored.

Sorry if my post came over sounding too tough, I'll balance it up by saying, I wish you and TC the best of luck and opportunities.

[Tasman Capital]

Hello Parky. Thanks for your questions and I'm sorry the offer document is not clearer. It might help if I use some background information as follows. There are 3 ways of listing an existing company that I know of:

1. The conventional method where a company has a prospectus made up and offers new or existing shares to the public with the help of brokers and investment banks to get the required number of shareholders with suitable spread and then lists when the offer closes. There are a lot of costs involved in this with lawyers, accountants and auditors preparing the prospectus plus fees paid to brokers and investment banks as well as the listing fees - perhaps $500k in total even for a small listing. These costs make listing pretty prohibitive for a small-cap company which is sad if it's at a stage where listing could benefit both the company and potential investors. Most of these costs would not be incurred using the Tasman method.

2. The traditional back-door listing method where a company wants to avoid method 1 above and finds a ready-made empty shell that is already listed (usually a failed company) to take over. The listed shell takes over the company wanting to list by granting it shares in itself as payment. This is a reverse takeover. Lombard's back-door listing via Pure NZ is the most recent example that I can think of. There are often problems associated with a traditional back-door listing that may come with the historical baggage of the shell as well as poor spread and liquidity of the shares themselves. The Tasman method borrows one key aspect from this process - the reverse takeover bit - and avoids the bad stuff.

3. A compliance listing where the company in question already has all of the requirements it needs to list, like the number of shareholders, spread of shareholders and size etc and simply applies to the NZX to list. As you can imagine, this is a pretty simple and cost effective way to list for those companies lucky enough to have all the requirements to do it.

Now let's take a company that wants to list that has the size to list but only has 10 shareholders - it can only list by using options 1 or 2 above. But, the Tasman method basically gives the company the option to list using number 3 above. Tasman's job is to get the company compliant for listing. Tasman does this by creating a shell by granting all its own shareholders shares in the shell at no cost. A reverse takeover then occurs. The company is now ready to compliance list. (There may be further work to be done to create good spread by using a rights issue or options for example, this could be done just prior to or after the compliance listing. Tasman would want the price of the shares subject to the rights issue valued at pre-listing pricing - great value in other words - as part of the whole deal. This last aspect in particular is why Tasman says it has the most exciting IPO of 2007.)

Hope that helps Parky, and hope the Prospectus makes more sense now.

Joseph van Wijk
Director
Tasman Capital

[Halebop]

I wouldn't fit the profile of a potential investor although it is a cute idea. My concerns would be...

Investing in new companies at 4x to hopefully gain 8x still requires me to front up with extra readies at 4x. The model is presupposing I can benefit by having that cash available at short notice. Investing in a new float is hardly a sure thing and recent experience has probably clouded peoples’ memories on how much of a lottery a new company float is. The easy gains will be made in optimistic financial market conditions. But then, the easy gains can be made elsewhere at these times too.

Shareholder bases have demographic profiles. People who are happy to own shares in oil and mining specs don't necessarily fit the profile of someone who owns say banks, insurance companies and supermarkets. The speculative nature of the Tasman float will bias the demographic. In turn, the companies that list via Tasman's shareholder base will more easily succeed in their objectives if they match that bias. Which leads me back to the first sentence...

[Parky]

Many thanks for further clarification Joseph.
The prospectus goes well to explain the concepts behind this, but I havnt seen any application of such concepts used in the market (which I guess Tasman will be the pioneers).
I guess it will become more transaparent as to the actual transactions when it lists; I guess then the risk would be the changes in the listing regulatory to strenghen processes behind this, perhaps the requirement for greater transparency of the vendor company would therefore possibly negate this effect (need for audited accounts etc as if it was an IPO).
I just dont see how listing regulations would allow for this type of listing to pan ahead as it is suggest by the way of simply having a clean shell and hiding much of the material facts of the vendor company through this process.

I might be on a completely wrong track but I do appreciate your time and I do understand the concepts and the benefits but little unsure as to the application in practicality.
Again appreciate your feedback.

[minimoke]

[QUOTE=zyreon;158174]...
In any case I'm in, I'll pay $500 for a chance to get in on some interesting listings....

But yeah Thumbs up from me:
-interesting concept
-potential for growth of investment
-free shares in new listings
-investment opportunities
-low exposure

[size=-2]EDIT:
Not sure I should admit this but I did the same once with Newcall. Had $500 kicking around and biffed it in without much thought. I should have known better but it was a great buy if for no other reason you need to be reminded of lessons learnt ealier in life.

This buy reminded me that any purchase needs to be made for good reasons – not because there was a spare few bucks kicking around; Its always useful to look at the pedigree of the Directors and Bracknell, Stubbs and Irvine could probably be used in the same conversations around Rocom, Retail x and Plus SMS.

This was such a small purchase it wasn’t worth my while tracking so I didn’t. I should have tracked and looked for the sale indicators – I didn’t. So rather than having one company I couldn’t be bother doing anything about I am now left with three - Blue Chip, Holly Springs and MFS.

Looking back NGL makes great reading – much like a good Mills and Boon with its twists and turns and inevitable ending. And like M&B the NZX has lots of other great tales listed.

[Tasman Capital]

I just wanted to make some comments about some recent posts.

Halebop, I think all investors, be they Tasman shareholders or not, as part of their normal portfolio management face the decision of how much cash to have available for opportunities should they come up. And if they choose at any one time to be fully invested, as you imply you do, then the decision becomes - is the new opportunity better than any investment currently held? If the answer is yes, then clearly another holding should be sold to take up the new opportunity. You almost appear to be saying the Tasman model will not fit you because you do not like to be presented with any new opportunities because you'll need cash to participate in them.

Halebop, you also assume you need cash at short notice to participate in Tasman opportunities. A rights issue typically has the documents in the hands of shareholders for about 4 weeks. I don't think that's short notice. And as for options and warrants, they are typically timed to expire at least a year into the future at a minimum - plenty of time to get your cash sorted. You may be thinking of the free shares, they probably will come at short notice, but they're free.

Also, I think the distinction needs to be made between 'new floats' and 'new companies'. Tasman looks for existing companies that are ready for the next step in their growth that could benefit from listing. Some may be many decades old. We are not looking for start-ups.

There seems to be the implication that floating a company makes the company riskier. If anything, listing a company can reduce risk because it gives the company a larger, stronger shareholder base and is often a catalyst for governance to improve.

I do not think it would be correct to assume the Tasman shareholder demographic is one of a risky investor. But Halebop is right in assuming the demographic is not typical because we want shareholders who are savvy, DIY investors who like to be given plenty of opportunities to invest in good companies at good prices. I know professionally and personally about 70 of those who have applied for shares under the IPO and they like to determine for themselves if an opportunity is good and if the price is right based on fundamentals. That is also why we are marketing our IPO on websites were savvy investors look for information and why Direct Broking is involved because many of the DIY investors use them.

Also, the offer document makes clear what sort of companies we are looking for. You can see the detail on page 8 but basically we are looking for established companies with sustainable profits, run by smart people, and if possible, with the potential to grow.

I don't think a mining company that is at a drilling stage would fit the criteria Halebop. And unfortunately there are no banks around for Tasman to list - but I wish there were - the NZ market could do with a few!

Parky, yes Tasman is the first to do this in the exact and specialised way proposed. However, our model is not designed to hide anything, it is designed to provide small/medium cap companies the best, simplest and most cost effective method of listing available in NZ with a ready made, strong shareholder base - companies that may otherwise have found it too difficult to list and perhaps be lost to private equity.

Also Parky, as we present our shareholders with opportunities to buy additional shares in companies, there will certainly be a need for investment statements, not a full blown registered prospectus, but certainly enough so that our shareholders can make an informed decision. Parky if you, or anyone, have questions for me directly, feel free to email me at Tasman at mail@tasmancapital.co.nz

Joseph van Wijk