After spending up to $30 million in cash and shares over the years, the bold experiment called Palamedia is no more. Seven Network personality David Koch started the company and has ended up as an embarrassed small shareholder and one of its major assets.
Crikey reported the split-up of the company last week, with the business news side on Sky News reverting to Sky, and the rest of the company effectively falling under the control of the major financier and director, John McNiven. He has advanced the company a revolving credit line of $1.75 million at 18-20% interest, which has kept Palamedia alive despite negative shareholder funds and an excess of short term liabilities over assets of well over $1 million dollars.
The last rites were announced yesterday in this short statement from the company. No sign of anyone in authority signing the statement, especially the executive chairman and secretary, accounting professor David Champtaloup.
The announcement detailed the sale of Business Intelligence International to Reed International Books and the sale of the production contract for Sky Business Report and the Australian Business Channel (on Sky Digital). David Koch “will remain contracted to Palamedia”, and the company will “exit from a loss-making custom publishing contract”. That refers to a deal to produce a magazine for American Express.
There’s no income for Palamedia from these assets sales. In fact, the cost of “exiting” these businesses will be $300,000.
The company’s ‘head count’ has fallen from 61 to 29, and the pared-back operation now only boast Insto magazine as its core business. There is no mention of My Business magazine or the TV show that starts on the Seven Network from 17 April.
An insider has emailed Crikey, pointing out that the strategy of an integrated business and finance media group has failed:
They announced they sold ABIX and the TV production – but guess what – there was no material consideration! Also they exited from a custom publishing title that was losing money – that happens to be Business Express that they were producing for American Express. That has been taken on by Hardie Grant – who are not known to do anything for free. So what does Hardie Grant know that Palamedia doesn’t? Probably how to sell ads!
And selling the TV gigs to the channel they were on seems like they couldn’t get an ad dollar there either. So that is one less worry for David Koch – and he rarely does the show any more and he doesn’t seem comfortable when he does.
So what is left? Insto – which rates a big mention in the announcement, and nothing else does. “On the Insto business, Palamedia paid the major shareholder $1.3 million for this in 2002 (70 million shares no less!) and now the total market cap is $1.5 million. So it’s all down to Insto. Their clients must be wondering about whole Palamedia strategy – if American Express voted with its feet then perhaps some capital market clients might too.