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Red-M Preps IPO

Light Reading
LR Mobile News Analysis
Light Reading
4/27/2005

Wireless security company Red-M Communications Ltd. has made a surprise move to launch an IPO on the back of its acquisition of network consultancy and optimization vendor Cellular Design Services Ltd. (CDS).

The vendor today announced plans to seek a listing on the Alternative Investment Market (AIM) of the London Stock Exchange (LSE). The company is believed to be valued today at £20 million to £25 million (US$38-$48 million), and will issue new shares worth between £10 million and £15 million ($19-$29 million).

“We intend to list the company in the first half of this year, before June,” says CEO Karl Feilder. No further details were forthcoming.

According to its Website, “AIM gives companies from all countries and sectors access to the market at an earlier stage of their development, allowing them to experience life as a public company.” Launched in 1995, AIM today lists over 1,100 companies.

It’s important, however, to note the differences in admission criteria between the LSE and AIM. The LSE market requires that at least 25 percent of shares are released into public hands, while the AIM has no minimum value. No minimum market capitalization is necessary for a listing on the AIM, and no trading record or prior shareholder approval is required.

Nevertheless, Red-M’s Feilder is keen to talk up today’s move. “If you are a European company, you would normally be recommended to go on AIM unless you are very big. AIM is a subset of the LSE and controlled and regulated by it... The first thing you have to do to get listed on the AIM is to find a nominated advisor, or 'nomad,' who is regulated by the LSE. You have to persuade them that your company is really appropriate to list. You are not allowed to list unless you meet a whole load of criteria. We are using Bridgewell as our nomad.”

The vendor’s plans may come as a surprise in light of past developments. Founded in 1999, Red-M purged its entire management team in the second half of 2002 following initial attempts to break into the 802.11 security space (see Red-M or Dead-M?). Although the company is now an established player in the wireless intrusion detection system sector, Red-M has never publicly disclosed its revenue figures or revealed levels of investment from VC backers Amadeus Capital Partners Ltd. and Apax Partners.

The vendor clearly has a few dollars in its back pocket though, as it has recently acquired U.K. business CDS for an undisclosed amount. “CDS was owned by Interregnum, which is itself an AIM quoted company, so there are very tight restrictions on what we could say and when,” explains Feilder.

“We had been talking to them for over a year. They are a renowned company in the in-building market as well as consulting and design and implementation of wireless networks.” Feilder states that CDS’s experience in “converging GSM and 3G wireless networks with WiFi” was a key attraction. “One of the things we wanted to do was to extend our experience in Bluetooth and WiFi to different wireless technologies.”

CDS’s head man, Simon Saunders, is to assume the CTO position at Red-M. Subsequent to today’s acquisition, Red-M Communications is to be renamed Red-M Group and will claim a total headcount of approximately 70.

— Justin Springham, Senior Editor, Europe, Unstrung

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