Energy Mad choice: 3% of PaySauce or 100% of nothing
By Jenny Ruth
Nov. 21 (BusinessDesk) - Energy Mad says it’s calling a special meeting for Dec. 6 to vote on the company’s future, including a reverse takeover by PaySauce valuing it at $10 million.
Energy Mad is planning to sell most of its existing assets to Ecobulb, a company that has already been acting as an agent to sell Energy Mad’s energy efficient lightbulbs.
Ecobulb is owned by Energy Mad founder and former managing director Chris Mardon and his family company is Energy Mad’s second largest shareholder with 7.7 percent.
Shares in the remaining assets will then be distributed to existing shareholders on a pro rata basis.
Energy Mad will then become a listed shell company with no assets.
It will then issue the 21 shareholders of PaySauce, a company that supplies payroll software as a service, with 5.67 billion new shares at 18 cents each.
Energy Mad’s existing shareholders will be left owning about 3 percent of the listed company which will then change its name to PaySauce.
Independent adviser Simmons Corporate Finance says although Energy Mad had a market capitalisation of $2.8 million as of Nov. 16, it had negative net equity of $4.4 million at Sept. 30.
Simmons also says the remaining assets being distributed to Energy Mad shareholders aren’t expected to be worth anything.
But the PaySauce transaction will transform the listed company.
Before the new shares are issued to PaySauce’s shareholders, PaySauce will distribute new shares in itself to both its founders, Asantha Wijeyeratne and Troy Tarrant and to Coulthard Barnes to pay for advisory services.
It will also sell new shares in PaySauce to various new and existing shareholders to raise about $1.15 million of new equity.
The Wijeyeratne associates will end up owning 35.7 percent of the newly listed PaySauce and Coulthard Barnes and associates will own 24 percent.
Simmons says the proposed transactions are fair to Energy Mad shareholders that aren’t associated with Mardon and Ecobulb.
Ecobulb and its associates won’t be able to vote on the Ecobulb resolution.
As well as the PaySauce transaction, Energy Mad shareholders will also be asked to vote on the appointment of Asantha Wijeyeratne, Andrew Barnes, Gavin Thompson, Mandy Simpson and Nick Lewis as directors of the newly listed PaySauce.
Simmons notes that all the resolutions are interdependent.
“In our opinion, after having regard to all relevant factors, the consideration and the terms and conditions of the Ecobulb transaction are fair to the non-associated shareholders,” and the rationale behind that transaction is sound, it says.
“It is an effective means of executing the board’s decision to wind down the Energy Mad business and sell the company’s residual assets.
If the Ecobulb transaction isn’t approved “the company’s inventory would need to be sold by someone other than Ecobulb” and directors think that would result in lower sale proceeds.
The PaySauce transactions wouldn’t be able to proceed either.
“In our view, the key overriding factor in assessing the merits of the PaySauce transactions is that, in the absence of the proposed transactions, the existing shareholders’ investments in the company have negligible value at this point in time,” Simmons says.
“The degree to which they are financially better off will depend on the value of PaySauce.”