MPL Communications Inc. goes public.
Last summer Pepper and Martland sold four million of the approximately 14 million MPL shares outstanding at an initial price of $1.27 per share in an underwriting deal that allows them to maintain control at least for the present. (The exchange rate is about 70 Canadian cents to the US. dollar.)
The key in determining how much money the two owners will eventually receive, when they relinquish majority ownership, depends on the success of MPL's plan to develop and enhance its financial web site and its investor education program.
Pepper said that since MPL began to trade on CDNX exchange (under the symbol MPZ), the company has "bought another dominant Canadian financial information web site."
"MPL will merge the new site with our own web site," Pepper said, "and relaunch it as a major investment advice, independent research and financial information portal for the Canadian investment marketplace."
Pepper and Martland owned 13 million of the approximately 14 million MPL shares before last summer. The underwriting plan also included the issuance of "special warrants" to the initial investors buying the four million shares. The special warrants will allow those investors to purchase a certain number of shares now held by Pepper and Martland at a fixed price.
"The special warrants were given to those investors who bought the initial four million shares as a bit of a sweetener," Pepper said. "If all those warrants get called in, Barry and I will actually just go under 50 percent ownership of the business. So we've sold about half the business on a fully diluted basis, essentially." The sale of warrants also meant additional money for the two owners.
MPL initially had discussions with traditional buyers when they decided to look into a succession plan. "We had a very good response and two very good expressions of interest. But they were using multiples that were pretty standard to the print periodical business," he said.
"However, over the past year MPL has made tremendous inroads into web site development and we had launched a web site that, wonder of wonders, is actually making money."
But the traditional buy-out offers didn't reflect the evaluation that Pepper and Martland had placed on their web site. So they approached a securities underwriting firm with the concept of spinning off the web site into a separate dot.com company and doing an IPO (initial public offering).
The underwriter convinced MPL to include the whole company, its print as well as its electronic products, in the plan to go public.
"The underwriter moved a block of stock at about 60 percent more than the best price we had gotten on a per share basis," Pepper said. That was to get some liquidity in the stock and set the marketplace up for a subsequent round of both treasury and secondary offerings from Barry and me."
During last June and July the price of the MPL stock reached $1.72 and heavy volume of two to three million shares traded in each of those months. Recently, the shares have been trading in the $.90-to-$1.00 range, and the volume has dropped into a range of 100,000 to 200,000 shares traded per month.
"The idea now is to get the per-share price up," Pepper said. "That's the bet. With our investment in these web sites and in this investor education program we want to put the e-commerce spin on the company and begin to get multiples for the stock that reflect the investment we've made to the company to become an e-commerce player.
"In the meantime, we've cashed in some chips at a premium," Pepper said. "It wasn't a major premium but we've still got a lot of chips left."
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|Publication:||The Newsletter on Newsletters|
|Article Type:||Brief Article|
|Date:||Feb 29, 2000|
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