Spurned Cube sees opening in e-education

By PETER GRIFFIN technology writer

Fresh from a failed bid to buy into listed online education company E-cademy, Cube Capital is going ahead with its plans to tackle the same market.

The Wellington-based investment vehicle says it will give details of the first of two acquisitions in online education within two weeks.

At the helm of Cube's technology strategy will be Wayne Johnson - founder of E-cademy, who quit the company in disgust after a July shareholders' meeting which pushed through an offer from Australian company MatrixIP to take a 57.4 per cent stake in E-cademy.

That decision was approved despite an apparently better last-minute offer from Cube.

The Takeovers Panel later cleared the MatrixIP deal despite an outcry from minor shareholders.

Mr Johnson, now a Cube director, described the company he helped build as a "worthless shell".

He has written off the four million shares he holds in E-cademy as a lost investment.

"If you look at [E-cademy] now, effectively it doesn't have any intellectual property, it doesn't have any people," he said, pointing out that the directors responsible for pushing through the MatrixIP deal, Alex Roche and John Varney, had resigned from the board.

"But the concept of what E-cademy was about is still something that nobody has done today," he said.

Cube's managing director, Simon Wallace, said the planned acquisitions would use elements of online education in industries such as tourism.

Cube, now drawing the bulk of its revenues from its furniture business, Damba Furniture, made a loss of $2.2 million in the half year to June, including a $2.7 million writedown in its corporate interior division, sold this month.

The company will finance its two acquisitions through the issue of new shares.

MatrixIP's managing director, Darron Passlow, now running E-cademy from Sydney, said the company would soon see the fruition of contracts which involved E-cademy contributing to the cost of putting educational materials online but sharing in subsequent revenues.

He rejected Mr Johnson's claims that MatrixIP was interested solely in E-cademy's intellectual property and hoped to extract it at low cost.

"I've now pumped $400,000 to $500,000 into [E-cademy] and we've come up with a serious business plan."

Now working for E-cademy rival NextEd, Mr Varney said he did not regret his decision to support the MatrixIP buy-in.

"[Cube] just came in with an offer too late. If they'd put the offer in a month earlier it may have been different."

Still in possession of around 25 million E-cademy shares, Mr Varney questioned whether a planned E-cademy share issue of 280 million additional shares was wise.

"This next round of dilution looks a bit severe," he said.

E-cademy aims to issue the shares to MatrixIP subsidiary Beconwood to raise $253,000.

Mr Varney said that E-cademy's technology was worthless without the company's established customer base.

E-cademy listed on the Stock Exchange last April. Shareholders invested at a "discount" price of 9c a share, valuing the company at around $12 million. Those shares now languish around the 0.5c mark.

"There's been quite a bit of restructuring and rationalisation and the money is needed in the medium term," said Mr Passlow.

He said a significant amount of money initially put into the business by MatrixIP had disappeared in legal bills surrounding the Takeovers Panel's investigation.