InterX: from distie to Net VC vehicle?
We think it stacks up
So what now for InterX, the London stock market-quoted group that announced its intention this week to demerge or sell off Ideal Hardware, a British storage distributor and its main asset? A demerger -- which could take up to six months to complete -- would see InterX shareholders receive new shares in Ideal Hardware, while retaining their InterX stock. A sale would see InterX shareholders receive new shares in a distributor -- probably overseas and probably American -- while retaining their InterX stock. Either way, it looks unfeasible for InterX, as an entity, to book any profits from the Ideal Hardware transaction. The Big Idea is to unlock the value in what's left in InterX -- two promising, but cash-hungry Internet properties. These are an IT product search engine, part of the IT Network (yeah, you've seen the buttons here at The Register), and 34 per cent of Cromwell Media, developer of a Internet personalisation and tracking software called Bladerunner. Ideal Hardware is one of the UK's most profitable IT distributors, but right now most of this is funnelled into the development and distribution of the IT Network. However, this week's soaring share price -- up 150p -- puts InterX in a strong position to tap existing institutional investors for more cash. Bladerunner is described by insiders as the "nearest thing to Broadvision". We're talking functionality here as opposed to market reach. Cromwell completed the productisation of Bladerunner (which began life more as a development tool) only comparatively recently, and it can count its customers on two hands. Also, there is work to be done on making its interface Internet-friendly. More importantly, this business will require tens of millions of pounds to build a global marketing and distribution machine. But we guess Cromwell and its new heavyweight management team will raise the money. The question for InterX now is whether it will raise fresh capital from outside investors and adopt the New Media Spark quoted-VC vroute. Typically, big British investors -- pension funds and insurance houses -- are barred, either by law, or by rules of their making, in making speculative equity investments. Non-quoted Internet start-ups fall into this category. This means the institutions get their chance to invest in the Net only at the point of IPO, a time of huge asset inflation. As a quoted company, InterX offers the opportunity for institutional investors to take a risk-spreading punt on two pre-IPO Internet start-ups. It would appear to make a deal of sense for InterX to incubate some more Net businesses. There's plenty more upside in this stock.® Related Stories Ideal to split from parent group Cromwell Media There's more Net finance news at Cash Register