Geotek is trying to persuade George Soros to increase his investment in the company, sources close to negotiations being conducted by Geotek reported to "Globes". Geotek chairman and founder Yaron Eitan has refused to respond to inquiries from "Globes" in the last two weeks. Soros currently holds 17% of the company’s shares.
In recent weeks, Eitan has had a series of meetings with potential investors, in an attempt to raise finance which will enable the company to continue to function, after posting a $240 million loss in 1997. Among others, Eitan approached some the world’s most famous Jewish magnates, but has so far had no response.
In a presentation to investors, and in a brochure submitted to them describing the company, Geotek is presented as a start-up company, even though it was set up seven years ago, and raised nearly $800million, in private placements and public issues. The chief shareholders in Geotek have included leading investors over the years, among them the Bronfman family of Canada, Merrill Lynch, and Soros.
The investment funds identified with Soros participated in several rounds of capital raising for Geotek in the past. In the latest round, in December 1996, Soros invested $50 million in Geotek, and, altogether, his investment in the company is estimated at $125 million.
In mid-1997, Soros allowed Geotek to postpone and reschedule loans he had given to the company, in exchange for convertible bonds, a step that was interpreted as a renewed vote of confidence in the company. On the basis of Geotek's share price last Friday, Soros’s capital loss on Geotek shares comes to more than $100 million.
The atmosphere at Geotek these days is tough. The feeling is that, unless finance is obtained soon, there will be no avoiding widespread lay-offs. Last year, the company employed 1,000 people in Israel and the US, but began to cut manpower towards the end of the year, both in the US and in Israel. The company employed 80 people in Geotek-Israel, and another 100 at Rafael who worked for it on development projects.
Geotek makes digital wireless radio systems for the organisational market, and its competitor is Motorola’s MIRS system. The company began operating its wireless network in the US last year, but the slow pace at which it signed up subscribers, alongside high marketing and operating expenses, occasioned it huge losses. At the end of 1997, the company had 12,500 subscribers in the US, in the nine different areas in which it operates the network.
Geotek's high loss in 1997 brought the company’s shareholders’ equity down to a $80 million deficit. In an effort to raise alternative sources of finance, the company sold assets in Europe to a value of $103 million in recent months. Some of this cash is earmarked for debt repayments to company bond holders.
Published by Israel's Business Arena on April 5, 1998