Small Talk: 2ergo founders face pressure to reduce stakes

Easier hearing; China Sholto float; CustomVis update; Genosis sets the mood for market conception
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The Independent Online

The founders of 2ergo, the Lancashire telecoms technology group, face a dilemma. Between them, Barry Sharples and Neale Graham own 54 per cent of the company and are under pressure to increase the liquidity of the shares, which have hit new record highs in the last few weeks. But founder-managers always have trouble giving up control and going below the 50 per cent bar is a psychological wrench, particularly in this case for a pair who see the benefits of mobile phone-based commerce just around the corner.

2ergo's software and hardware sits at the centre of internet, fixed line and mobile phone communications, enabling new ways for businesses to interact with their customers. Services such as text message weather alerts, interactive games, bulk emails for internet marketing all pass through the system, and mobile commerce - things like text message gambling, shopping and road toll payments are being developed by several of 2ergo's customers. A trading update last month revealed the company's results were outstripping even the market's most optimistic forecasts, and the US division had gone into profit.

The solution to the Sharples-Graham dilemma is still being worked out, but is likely to involve a mix of share sales by them and a placing of new stock to raise funds for expansion in the US. Expect the two managing directors to cash in about £2m apiece, about 15 per cent of their stake, with around £6m raised for the company, in a placing by the end of the year.

Easier hearing

Neville Buch and his band of rebel shareholders in Easier - the delisted cash shell where £5.4m is unaccounted for - traipse once again to the High Court this morning in their bid to be installed as directors. Regular readers of Small Talk will be aware that Easier failed to publish its accounts for 2003 and has not communicated with investors since. Two successive auditors resigned in protest at a lack of co-operation from the company and from directors linked to its largest shareholder, an offshore outfit called Fulton Partners. A first court hearing, earlier this month, was adjourned because Easier had only just instructed its counsel. This morning's hearing might still get bogged down in procedural detail, so there is no guarantee that Fulton will have to bow to the inevitable just yet. The hundreds of small shareholders who have been locked in since the delisting may have longer still to wait for answers.

China Sholto float

There are nine million bicycles in Beijing, that's a fact, that's a thing we can't deny. So sings Katie Melua on her latest song. She doesn't go into much further detail, so listeners don't know that across China, six million bicycles per year are made with an electric motor. China Sholto, a company which makes the batteries for these motors, is floating on AIM next month, and hopes to have a £35m market valuation.

The company - whose board includes Bernard Asher, former head of the HSBC investment bank - also makes industrial batteries and uninterrupted power supply systems for the telecoms market, both of which businesses are booming, thanks to China's industrial revolution.

China Sholto has previously focused on its domestic markets, but Cao Guifa, chairman, says it is now in a position to exploit market opportunities overseas. All products are designed and manufactured to meet international standards and the additional benefit is that costs of production are lower than those achieved by manufacturers in Europe and North America. The company is raising £10m through Seymour Pierce to fund an acquisition and overseas expansion.

CustomVis update

Small Talk wrote in August about CustomVis, the inventor of a new laser for eye surgery which was on course to run out of cash at the end of this month.

The company has faced all the delays, teething problems, and forced redesigns that affect a new piece of hi-tech equipment, but we said it would be a shame not to refinance the company now that the first orders were coming in.

That refinancing happened last week, with a placing of shares at 5.75p (no discount to the market price) raising £1.47m. Expect a wave of product sales in the coming months.

Surgeons have been holding back from purchasing the equipment until now in case the company went bust, leaving them with no one to do maintenance or offer product support.

Genosis sets the mood for market conception

The company behind a his-and-hers fertility test is planning a £26m stock market flotation before the product goes on sale in Boots.

Genosis is raising £8m to fund the launch of the product, called Fertell, which it says gives as good a result as a traditional laboratory test in 95 out of 100 cases. The January launch makes Fertell the first test that can be used at home and means couples having trouble conceiving can avoid an embarrassing and perhaps unnecessary trip to the doctor.

The chief executive, Paul Bateman, said that cash from the flotation will help speed up the launch of Fertell in the lucrative US market.

The canoe-shaped female test requires a urine sample and operates like a pregnancy test, while the male kit requires a semen sample. A spokeswoman for the company explained: "The male kit comes in half, and the bottom half is like a porridge bowl. You put your porridge in, put the lid on, push the blue knob down, twist the orange one, have a glass of champagne and a cigarette, and five minutes later you look at an indicator in a window round the back. Red line good, no line and you're a jaffa. Quite simple ... even for a man."