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Tuesday, 25 March 2014

Web Company Started by Megaupload Founder to List in New Zealand

WELLINGTON, New Zealand — The Internet file-storage company Mega, started last year by the entrepreneur Kim Dotcom, who is accused by United States prosecutors of racketeering by facilitating the widespread illegal downloading of songs and movies, announced Tuesday that it plans to list on the New Zealand stock market.

Documents filed with the NZX stock exchange put Mega's value at 210 million New Zealand dollars, or $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 maneuver known as a reverse takeover, using a small company that is already listed on the exchange as a vehicle. Mega's chief executive, Stephen Hall, said he hoped trading would begin in early June.

The flamboyant Mr. 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 law enforcement officers stormed his home in a 2012 raid, arresting him, shutting down his site and freezing his bank accounts. He spent a month in jail before being released on bail.

United States prosecutors are trying to extradite him and his colleagues to face trial in the United States. The extradition hearing has been delayed several times and is now scheduled for July.

Mr. Dotcom argues that he cannot be held responsible for those who chose to use his site for illegitimate purposes. Last week, Mr. Dotcom lost a ruling in New Zealand's Supreme Court as part of his legal battle to try to avoid extradition. He was seeking full disclosure of the United States' evidence against him at the extradition hearing, but the court ruled an American summary of the case would suffice.

United States prosecutors, who have declined to comment on the case, have previously pointed to promises Mr. Dotcom made in his bail application that he would not reactivate Megaupload or start a similar site before the extradition case was over.

He stepped down as a director of his latest venture in August, although his wife, Mona Dotcom, continues to own 26.5 percent of Mega through a trust, according to company records.

Mega offers services similar to Dropbox and Google Drive but says that one point of difference is the high level of security it offers through encryption. In documents filed with the stock exchange, Mega said that it had seven million users who had stored 860 million encrypted files, and that it planned to release new encrypted chat, videoconferencing and email services.

Mega had grown rapidly, Mr. Hall said, partly because people were increasingly concerned about online security and government snooping. He said the company's growth had generated significant interest from potential investors, although the listing was not designed to raise capital.

Mr. Dotcom commented on Twitter on Tuesday about 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 favored by some companies as a way to save time and money from a traditional initial public offering and can involve less regulatory scrutiny. In a guidance note, the NZX stock market said such listings, also known as backdoor listings, were allowed but that it tried to ensure adequate disclosure standards were maintained.

Under the plan, the listed company TRS Investments will buy Mega and become 99 percent 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 percent Tuesday after the announcement, to 1 New Zealand cent.

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. Mr. Hall, the head of Mega, said those charges predated Mr. Choiselat's involvement with TRS and Mega. "It's not relevant to this business," he said.

Mr. Dotcom is also planning this week to begin registering members of his nascent Internet Party to contest New Zealand's general elections in September. Under the country's electoral rules, a party must have 500 paid members before it can contest the election.
From BEN Latest News: www.benlatestnews.com
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