Founder resigns as shares plummet

Plus SMS founder Garry Donoghue has resigned from the text message marketer and will hand back millions of dollars worth of shares after the company admitted issuing misleading statements to investors.

Chairman Jim Bracknell also resigned after yesterday's revelations, which caused Plus SMS shares to plunge 53 per cent to 16c and prompted a Securities Commission investigation.

Donoghue will return all of his 85 million shares, which at the start of the week would have been worth $30.6 million but were worth only $13.6 million by close yesterday. He will not be paid for them.

Chief executive Christopher Tiensch said Donoghue felt it was in the best interests of shareholders for him to return the shares and resign as a director and executive because he had failed to achieve the goals and objectives of the company.

A company statement said: "This resolves all issues between Mr Donoghue and the company." Tiensch did not expand on the reasons for Donoghue returning his shares, but denied there had been a falling-out within the company.

Incoming chairman George Brooks said the company had made what in hindsight "appear to be a number of unrealistic statements".

Plus SMS, which posted a $1.3 million loss for the 10 months to September last year, plans to enable companies to run global text message campaigns and competitions using single codes.

The company previously claimed to have exclusive control of more than 1000 country and national designation codes, ownership of thousands of vanity short codes, and contracts covering more than 70 per cent of the number ranges it was seeking, which by mid-2006 would be largely acquired.

All these claims were incorrect.

The actual number of exclusively controlled codes was being investigated, the company had access to only just over 100 vanity short codes, and the priority of a new management team was to negotiate contracts as soon as possible.

However, Tiensch - who has been chief executive since June - said no one was to blame for the incorrect statements.

"What I would say is that we are under this review process and we're doing everything possible to rectify the situation."

After the collapse in Plus SMS's share price yesterday, it now has a market capitalisation of just $55.5 million.

Last November, the company had a market capitalisation of as much as $277.4 million as investors bought the shares in the hope that the company's message marketing concept would be picked up by major companies for use in worldwide marketing campaigns.

Macquarie Equities investment director Arthur Lim described the announcement as a disaster.

"People who bought into these stocks should have known it is in a highly speculative category," Lim said.

The bad publicity could damage the development of the business, he added.

"I think something like this impacts adversely on the credibility and therefore the ability to access ongoing funding."

Tiensch said he empathised with disappointed shareholders "but our process of turning around the company, rebuilding it, putting it on the right path for future potential is important and that's what we're all about doing".

Looking to the future, the potential to commercialise Plus SMS remained positive, he said.

"The company has a promising, pioneering concept, one that is at the leading edge of interactive mobile services," Tiensch said.

"We've secured the ongoing commitment and support of cornerstone shareholder Hewon Capital Ltd to support our future growth and we have the benefit of a world-class advisory board."

A contract with Pak Telecom for exclusive use of Pakistan number ranges had lapsed and was being re-negotiated, while various agreements with regulators in several other countries were under review.

"Probably most important is to look at the value base which were these contracts and to go out and re-negotiate those and make sure that we can generate revenues from those," Tiensch said.

Apart from reviewing existing contracts the company would appoint a new management team, strengthen its technical capabilities and establish a UK operations centre to support the international exchange of messaging and content.

"As a result of these changes there is now no prospect of revenues this year," Tiensch said.

"In addition to pursuing our current business plan we are investigating a range of alternative revenue streams which can be implemented over the next year."

Bracknell resigned "to pursue other interests", according to a statement.

He made no comment when contacted by the Business Herald yesterday.


Plus SMS incorrect statements

"We have exclusive control of more than 1000 country codes and national designation codes." [The actual number is being investigated.]

"We own thousands of vanity short codes." [The company has access to over 100 vanity short codes.]

"There are contracts in place that represent over 70 per cent of the number ranges the company is seeking; by mid-2006 we'll have largely completed the acquisition of these number ranges." [Highest priority for new management is to secure these contracts.]

"Negotiations are under way to complete another three hubbing arrangements by mid-2006." [Limited progress has been made with negotiations and the future outcome is uncertain.]