Haha - there are a few people in that book that I had dealings with back in the day. I never made any money back then though, I too young and stupid (now I'm just old).
From "Dot Bomb Australia. How we wrangled, conned and argie-bargied our way into the new digital universe". Askew, Kate. Allen & Unwin 2011
During this time of daring deals and chameleon-like corporations, every now and then there was a whisper of discontent, followed by accusations that these companies were vainglorious and lacking in substance. Yet substance was an overrated quality in a stockmarket boom like this, and company directors who found something for avaricious investors to get excited about—no matter what it was—were, it had to be said, just catering to their needs. Then there were those internet-style start-ups that had very good ideas, but ran out of the cash to live up to them
The gold chain-laden Vladimir ‘Roger’ Nikolaenko had been mining the stockmarket for long enough to know a greedy investor. So when mining the internet offered better returns than digging in the Western Australian dirt, Nikolaenko was more than happy to oblige his investors. But Nikolaenko’s Nexus Minerals would have to wait until January 2000 for that opportunity.
MTIC was a private Perth company run by three young technology gurus: Adrian Floate, Russell Miln and Andrew Mann. As Trevor Sykes, aka Pierpont, pointed out in the Australian Financial Review, they believed they had found a means of ensuring payments over the internet were secure. Nexus offered to buy MTIC for a forest of paper—about 20 times its issued capital. And the technology wasn’t all Nexus bought—thrown into the deal was the 26-year-old Floate and his colleagues.
Floate was important because he was even more upbeat than Nikolaenko. Nexus shareholders, whose stakes were being diluted beyond recognition, needed to hear good news, and that is what he gave them: the revamped Nexus was going to be a global leader in the e-commerce sector—no, make that a dominant global leader in the e-commerce sector.
Nikolaenko was downbeat by comparison. He merely talked about Nexus in terms of it becoming Australia’s leading software company. But at least he said something, because that was about as much detail as investors were given to go on. Any real numbers were clearly a treat that had to remain locked in the pantry until after the deal had been done—a deal that could increase its share price by more than 20 times.
And the technology was brilliant. It wasn’t relying on a simple website; it was offering security for all those people who wanted to use the World Wide Web. It used the so-called SET protocol established by Visa and MasterCard, which was apparently even more secure than the alternative SSL protocol which was widely in use.
So Nexus moved to its next incarnation as IPT Systems.Sadly, there didn’t appear to be much of a system in reality—only months later, the market would decide the internet wasover as quickly as it had begun, and Nexus’s investment nolonger looked nearly as interesting. Its technology division,MTIC, was suddenly having difficulty finding the amount ofcash needed to fund its global ambitions.
Nikolaenko, meanwhile, being a fl exible chap like many of these resources types, decided that digging dirt was, after all, more attractive than mining the internet. It paid $2 million for part of a mining plant from a company called Plato Mining. At least he could tell IPT (née Nexus) shareholders that he knew more than a thing or two about Plato—he had an interest in it.
What followed was a sad but all-too-common tale of what can occur when a boom busts. Views differed on whether IPT ought to return to mining. Nikolaenko found his only two other board members unusually disagreeing with him. Approaching the end of 2000 MTIC—which was being run by its original team and had to ask for budgets to be approved and capital to be handed over, even though it was really a division of IPT—had run down its cash. Nikolaenko had no desire to spend any more money pursuing a global ideal with profi ts years away, which was hardly an attractive timetable for a fellow in a hurry.
Facing no better choice than to call in the corporate undertaker, MTIC did just that. It appointed dot.com expert Ferrier Hodgson as its administrator. Not at all pleased, Nikolaenko decided he would rather put MTIC into receivership—in so doing he would at least preserve some sense of having control of his internet experiment. At the same time, he kicked out Floate as managing director. Just to make it clear how he felt, IPT then promised shareholders it would go to court to investigate the representations the MTIC people had made to Nexus back before the boom busted
What Nikolaenko and IPT’s chairman Patrick Lyons hadn’t accounted for was the capacity of a 26-year-old to make a comeback. Floate, with the backing of just enough shareholders, decided he was going to rid IPT’s board of both Lyons and Nikolaenko. Nikolaenko, realising quickly that the tide was turning, exercised one of his greatest skills, his gift of the **, and did what the majority wanted—he paid all of MTIC’s creditors out. Everyone was happy. IPT agreed to pay Floate $250,000 annually for three years for services rendered. It also agreed to pay Nikolaenko $300,000 annually for five years (presumably the extra $50,000 was tacked on as a mark of his seniority, or perhaps it was for his fl exibility). MTIC was advanced $2 million for its internet endeavour.
The deal wasn’t to last. One of the three MTIC founders, Russell Miln, engineered a board spill. The new board negotiated a truce with Nikolaenko, which saw him keep the deal to buy said mining plant and fl oat it off—but only temporarily. Nikolaenko and his deals were eventually seen off. The new board also reinvestigated the original MTIC deal. And in a rare win for companies that had bought assets at high prices in order to take advantage of the internet boom, it negotiated for Floate and Mann to hand back to the company all the shares they had received in return for selling their stake in MTIC—a total of about 67 million shares. Miln handed back one-third of his 33 million-odd shares.
But Miln stayed around to help run the technology business. IPT also bought the remaining 20 per cent of MTIC that it didn’t own for a mere $150,000, which was less than it paid for 80 per cent of the company when the initial deal was struck.
CRO Price at posting:
6.3¢ Sentiment: Buy Disclosure: Held
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