GS Telecom Retreats as SEC Eyes Firm's Revenue Forecast
By CARRIE LEE
THE WALL STREET JOURNAL INTERACTIVE EDITION
When GS Telecom, a United Kingdom company with no commercially available
products, made a $1 billion revenue projection last week, its stock tripled and online
investors snapped to attention.
But the euphoria quickly ended.
Late Thursday, the company, which also has an office in San Francisco and whose
shares are quoted on the OTC Bulletin Board service, issued a statement "retracting all
references" to its revenue expectations because of concerns by the U.S. Securities and
Exchange Commission.
A spokesman for the SEC declined to comment on the matter. But he said that in
general companies must have a factual basis to back up any forward looking statements
they make.
GS Telecom had no sales in the fourth quarter of 1998 and lost $70,000 for the period.
It had just $20,200 in assets on Dec. 31, 1998. Its 10 employees are all members of
the company's board or "advisory board."
Stuart Ashmore, GS Telecom's vice president of marketing, said Friday that he still
thinks the company could hit $1 billion by 2004, as it said in a series of press releases
beginning March 31.
But he said that in light of the SEC's concerns, that isn't an official company forecast just
yet. "I'm not allowed to make any claims like that until I've got some sales figures to
back it up," he said.
GS Telecom's stock market value surged as high as $156.7 million after it issued the
revenue forecasts. The stock, which traded between $2 and $3 most of March and
changed hands just sporadically prior to that, shot as high as $9.312 on April 1. It
retreated to $3.968 by Friday.
The stock's gyrations and the company's press releases have caused a clamor online.
More than 500 messages about the company were posted on the Raging Bull Web site
(www.ragingbull.com) this week alone, and the Silicon Investor message board
(techstocks.com) devoted to the stock was also active. Many were enthusiastic as the
stock shot higher but, not surprisingly, grumbling picked up on the board late in the
week.
The activity in GS Telecom's shares is also important to several business associates,
including Union Trading, a Geneva company it hired to help sell $25 million in bonds,
and CompletePR, a Phoenix public relations firm that promoted the company. Both
were paid in GS Telecom stock.
Mr. Ashmore couldn't confirm how much stock Union Trading received. Lee
McCaskill, a partner in CompletePR, which was hired and paid by Union Trading,
wouldn't say how much the firm was paid.
A spokesman for Union Trading couldn't immediately be reached. A message left at a
phone number for the company that was provided by Mr. Ashmore wasn't returned late
on Friday.
Union Trading also used GS Telecom stock to pay NewTrend Holdings, a British
Columbia company it hired to design two web pages that contained a research report
about GS Telecom.
NewTrend received 75,000 GS Telecom shares in March and will be paid an additional
25,000 shares a quarter for electronically disseminating information about GS Telecom,
according to a disclaimer on the Web site.
The research report was written by Barrington Financial Securities Analysts, which the
site identifies as a Geneva-based company. A spokesman for Barrington couldn't be
reached, and a U.S. telephone number for the firm included on the site was answered
by a man who identified himself as Anthony Leone, who said the number was that of
Corporate Profile. He said Corporate Profile does investor relations work for GS
Telecom.
GS Telecom says it aims to fuel much of its growth from its "ATTM Universal Card,"
something akin to a prepaid telephone-service card that it says will allow users to make
transactions denominated in 53 currencies. The company says cardholders will be able
to use cards as a credit card, a debit card and in making electronic payments on the
Internet. The ATTM card doesn't exist yet. Ms. McCaskill says it is in a "prototype"
stage.
"We've got some projections that show the explosive growth in smart cards. If they take
off in the U.S. as in other parts of the world [$1 billion] is tiny," Mr. Ashmore says. Ms.
McCaskill says the company arrived at its $1 billion revenue projection by estimating
that GS Telecom will capture a 1.5% to 2% market share of world-wide credit card,
debit card and e-commerce transactions.
These are lofty goals for GS Telecom, which only set its sights on electronic commerce
and its other technology objectives in the fourth quarter of 1998. The company was
formerly known as Teleconferencing Systems International, a business that was
incorporated in Colorado in 1983 to make and sell audio teleconferencing systems,
according to SEC filings.
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