Jordex's Medsite interest remains a mystery
Jordex Resources Inc JDX
Shares issued 30,374,357 Dec 23 close $1.76
Thu 23 Dec 99 Street Wire
JORDEX BUYS MORE MEDSITE.COM
by Will Purcell
On Wednesday, Jordex Resources Inc. announced the latest in a series of
deals that has seen the company move away from the resource sector, toward
the currently hot information and technology sector. The deal saw Jordex
invest $500,000 (U.S.) in HorizonLive.com, as part of a $6.1-million (U.S.)
second round of financing undertaken by HorizonLive.com. Horizon is a
provider of on-line presentations, interactive group learning, and
collaborative solutions on the Internet. The company's service appears
tailored toward various forms of corporate training and real-time or
recorded interactive presentations. Horizon now lists client relationships
with a number of companies, such as Lucent, Siemens, Prentice Hall,
Ericsson, NASA, 3Com, Thomson Global Markets and others.
Jordex appears willing to consider a diverse array of opportunities to
invest its $20-million (U.S.) cash windfall, gained as a result of the sale
of its share in the Venezuelan Loma de Hierro nickel project. Recently, the
company announced that it had signed a letter of intent to acquire a
100-per-cent interest in Enviromation Inc., a private company in the
business of designing and manufacturing control systems for water treatment
facilities. Jordex also recently announced an agreement in principle had
been reached with an investment affiliate of Manulife Capital Corporation,
an indirect subsidiary of one of Canada's leading financial services firms.
Under the terms of the deal, Jordex would invest $1.5-million (U.S.) in MF
Private Capital Ventures LP, one of the affiliate's funds. As well, Jordex
will apparently be offered an opportunity to co-invest in the fund's future
deals, and William Staudt, president of Jordex, will join the fund's
advisory committee. Most of these potential investments are in
communications infrastructure, technology, medical device technology, and
Internet companies.
Earlier this year, Jordex announced that it had made a $1-million (U.S.)
investment in Medsite.com. The investment consisted of an 8-per-cent
subordinated exchangeable note, which could be converted to either
convertible preferred stock or common stock. The instrument had an interim
maturity date of Nov. 30, 1999, at which time Jordex was required to
announce its conversion decision. Medsite.com raised a total of $6-million
(U.S.) through the issue of these notes, the fourth round of financing
undertaken by the company since its beginning. At the time, it was believed
that Medsite had raised a total of approximately $25-million (U.S.), and
while Jordex vice president, Jim Graham, could not say what share of
Medsite was owned by Jordex, he did indicate that the percentage was
already set. He also stated that the information would become public prior
to an initial public offering planned by Medsite. It seems unlikely,
however, that a $1-million (U.S.) investment at the tail end of $25-million
(U.S.) reaps 1/25th or four per cent of the shares, especially if the money
raised to that date included the usual nominal amount from founder shares.
Medsite has since completed two additional rounds of financing. Early in
November, the company announced the sale of $30-million (U.S.) of newly
issued Series B convertible preferred shares. As well, the company stated
that the previously issued subordinated notes would be exchanged for the
convertible preferred shares, in addition to the financing deal. Six weeks
later, still more shares were issued when Medsite announced that it had
closed an additional $19.7-million (U.S.) of equity financing. That deal
brought the total equity raised by the company over the last six weeks to
$55.7-million (U.S.), a grand total of perhaps $75-million (U.S.) to
$80-million (U.S.).
Buried deep in yesterday's news was word that Jordex, through an additional
investment, recently increased its holding of Class B preferred Medsite
shares in order to maintain its proportionate ownership through the most
recent financing. It appears the news was downplayed for a reason, as Mr.
Graham was unable to provide any details of the latest Medsite deal. He
said that the company was restricted in what information could be provided
about the investment, but he did state that the latest purchase formed part
of the $19.7-million (U.S.) share offering. The veil of secrecy was not
limited to Jordex officials. KCSA Public Relations Worldwide currently
handle investor and media relations for Medsite, and they were similarly
tight lipped. KCSA spokesman, Jeff Corbin, said that as a private company,
Medsite was not obliged to provide information about the financing deal, or
other particulars.
Greg Scott, Medsite's chief financial officer, was somewhat more open about
some aspects of his company, however. He said that the rumoured initial
public offering was not a certainty, stating, "We're evaluating options
vis-à-vis going public, but we have not drawn up any definitive plans of
yet, nor have we made any public filings as yet." In the meantime, he said
that Medsite remained a public company, and details regarding the recent
financings would remain sparse. "As a private company, that's the kind of
stuff that we would prefer to get out there once we make our public
filings, as opposed to getting ahead of ourselves on any of that stuff. As
you can appreciate, we try not to give out much if any financial
information in advance of a public filing because we never know how a
public filing might differ from what might get out ahead of time. It's just
prudent not to make a lot of statements about the structure or financial
results of the company, prior to making those filings. Our investors come
in and are sensitive to this, they bought in a private placement
transaction under certain disclosure restrictions, and so we really have to
operate on that basis." Mr. Scott did acknowledge that the matter of going
public was a hot topic with Medsite. "It's something that we discuss fairly
routinely with our board of directors. Every time we have a board meeting,
we discuss whether this is the time, or whether we are in the right
position. It's something we discuss all the time," he said.
Mr. Scott did provide one clear detail about Medsite's financial matters.
He said, "I don't mind saying, our revenues will be something in excess of
$12-million (U.S.) for the 1999 calendar year, a very significant positive
change." While some projections suggest revenues for 2000 will be in the
order of $50-million (U.S.), Mr. Scott said he was unaware of the origin of
that prediction.
The funds raised appear to have been put to good use. The Medsite Internet
site has been totally revamped over the past few months, and incorporates a
number of new features, and links to new partners. As well, the site and
its many pages appeared to load and operate very quickly. Mr. Scott said he
was pleased with the new site and its speed. "We try to keep pace with
that. When you're serving the physician marketplace, these are individuals
who don't have a lot of time to waste. We attempt to make sure it's as user
friendly that we can possibly make it, because physicians are a
discriminating group of buyers and users, and that's our target market." He
went on to say that Medsite was ultimately hoping to reach a wider group
than just doctors. He said, "We feel that in catering our offering to the
physician community, those that surround the physicians, the physical
therapists, the nurses, the allied health will be drawn to this as a member
of that community, but the thought leaders tend to be the physicians. If
you capture the thought leaders, you tend to be able to capture the entire
community. We certainly try to tailor our needs to these other people, but
we are specifically driving after catching the attention of the physician."
Mr. Scott acknowledged that competition in the sector was fierce, but he
stated, "I think we're positioned very well, principally because we're
really not a pure content site. We're really are much more a commerce site,
than we are a content site. We're looking to sell very tangible products
and services that we feel doctors will find are value added. We are really
not just in the business of providing information and hoping to make
revenues on advertisement. We're really commerce driven, as opposed to
advertising driven, and I think that differentiates us in this particular
space to a degree."
Medsite continues to believe that the sector will see consolidation in the
future, as the competition sorts itself out. Mr. Scott said, "I think
that's inevitable in this type of a market environment, where there are so
many purveyors of electronic information services. At some point in time
there will be a consolidation in the industry, that's to be anticipated."
As well, the traditional lines between friend and rival appear very blurry.
Mr. Scott stated: "It's really hard to relate who our competition is,
because we work with so many other firms, as their commerce site. We have
partnership agreements with so many of them, and in fact, we work closely
with them. It's sometimes hard to tell the competitors from the friends,
that's why we're very comfortable with our positioning as one of the
premier commerce sites in the space. Others are willing to work with us,
and we find that gratifying." He makes a valid argument. A number of
companies that would appear to be direct competitors actually market
Medsite books or services on their sites.
Medsite appears to be taking a methodical approach to further development.
Mr. Scott stated that the company would "just keep doing what we do, and
growing our market share." He added, "Our goal is to get the attention of
physicians in their offices, and by creating products that they will find
as real value-added products. We hope, in the long run, to be able to make
the physicians practice more efficiently as a result. The way things are in
the United States these days, physicians have to see an awful lot of
patients to fill their day, and they don't have a lot of time to waste on
ancillary activities." He went on to say that he hoped that his company
would be able to help them make more efficient use of their time, and added
that hopefully, Medsite can make some money off of it at the same time. As
for when the decision regarding an initial public offering would be made,
Mr. Scott said, "Stay tuned. It may not be too far off in the future."
The cloak of secrecy regarding the Jordex investment will be lifted in the
not too distant future as well. While Medsite currently is a private
company, Jordex is publicly traded in Canada, and is required to make its
financial documents available to the public. Once the details of the latest
investment are released, investors should have an accurate picture of the
company's investment in Medsite. Based on the sparse amount of information
currently available, Jordex appears to own only a small portion of Medsite,
possibly in the order of 2 to 4 per cent, and probably much less. Indeed,
the company's financials already provide a few clues to the details of the
Medsite financings. The third quarter report, released in mid-November,
stated that the $1-million (U.S.) subordinated note had indeed been
converted into 200,000 Class B preferred shares in late October. While the
current value of a Medsite preferred share is unknown, the conversion
implied a recent value of $5 (U.S.) per preferred share. Again, there is no
clue as to what might be the conversion rate of these preferred shares into
common.
The market continues to respond favourably to the moves made by Jordex.
From its 31-cent low last summer, the company's shares rallied to a high of
$1.12 by mid-April, but declined to an end of September low of 65 cents, in
the absence of news of additional acquisitions. The recent flurry of new
purchases has sent Jordex shares sharply higher, reaching a new intraday
high of $1.87 today, before closing at $1.76, up nine cents on the day.
(c) Copyright 1999 Canjex Publishing Ltd. canada-stockwatch.com
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