Crikey was the first to cast doubt upon Run Corp, way back when it
floated in January this year. Alarm bells should have rung for
investors who are probably advised to avoid investing their hard-earned
in companies which spend $6 million in order to raise $25 million on
the market. Since then, things have gotten pretty grim for Run
investors, who have seen their shareholding lose almost 80% of its
value. Few are likely to be more aggrieved than Nathan Cher, who is
sitting on a paper loss of almost $8 million (as the proud owner of
more than ten million Run shares).

Cher is presumably angry enough to have been parachuted into the CEO
position, ousting the hapless Paul Villanti. As part of the
restructure, Cher noted that Run will relocate its “property managers
and leasing consultants closer to their owner and property base to
enable them to deliver even more personalised, efficient service with a
strong local touch”. This is a pretty significant departure from Run’s
current business model which involves a centralised “call centre”
approach to property management.

The appointment of Cher as CEO is an interesting one, as from all
accounts, Cher has a background in information technology rather than in
property. Cher is listed in the Run prospectus as being the “co-founder
of Dimension Data Australia (formally Com Tech Communications), which
at the time of [Cher’s] departure was a business with annual sales
exceeding $750 million with 1400 staff.” When questioned, this
statement was confirmed by Cher.

Dimension Data is a well-known global software business so it was
surprising that the name Nathan Cher hadn’t been bandied around in the
media much, especially since Dimension Data Australia allegedly turned
over $750 million. After doing a little bit of investigating, it turned
out that while not necessarily being dishonest, the above statement is
arguably misleading in several respects.

First, Cher was involved in an Australian company called Com Tech
Communications. A few years before Com Tech was founded in 1987, a
South African Company called Dimension Data began operations. Dimension
Data, which later relocated to the UK and listed on the London Stock
Exchange, initially invested in Com Tech in 1996 (and in 2000 moved to
full ownership). Dimension Data is one of the leading IT solutions
companies globally, with revenue of US$2.7 billion in 2005. Therefore,
while certainly not an outright lie, it is possibly misleading for Cher
to claim that he was the founder of Dimension Data Australia. Rather,
Cher was significantly involved in a company that was later bought by
Dimension Data and as a result, changed its name to Dimension Data
Australia. (For example, it would be misleading for the founder of
Billiton to claim that they founded BHP-Billiton).

Second, it is unclear whether Cher actually founded Com Tech. The website of Holly Australia (a company which Cher is a director) only refers to Com Tech as being founded by David Shein. Further, a cached page on the Dimension Data website
notes that Cher was appointed Technical Director of Com Tech in 1987,
it makes no reference to Cher as being a founder of Com Tech. When
questioned about the irregularity, Cher noted that he was “the second
person in the company in the startup months of operations in late
1987″. Again, while there is no doubt that Cher played a
significant in the development of Com Tech into a very large business,
it remains unclear whether Cher actually founded Com Tech as stated in
Run’s prospectus.

Third, the Com Tech sales figures of $750 million per year specified in
the prospectus (and confirmed by Cher to Crikey) contradict the
revenues reported in Dimension Data’s 2000 Annual Report. Dimension
Data stated that in 2000, its Australian operations had just over
US$400 million sales (or around AUD$696 million using Dimension’s
listed exchange rate). While the error is not egregious, there seems to
be no reason for Dimension Data Australia’s revenues to have been
overstated by almost 10%.

That being said, a slightly misleading biography in a prospectus should
not preclude Cher from becoming CEO of Run. Even if Cher didn’t
technically found Com Tech (or Dimension Data Australia) he was clearly
instrumental in the growth of a very large and successful Australian
technology business. For the sake of Run’s suffering shareholders,
hopefully his performance at Run will emulate his success at Com Tech.