Spinvox investors got £600 from Nuance deal
A couple of weeks ago, the American speech-recognition firm Nuance paid $102.5m - around £64m - for the British voice-to-text firm Spinvox, and we speculated that most of the investors would get very little from the deal. Now I've found out just how little.
The people who had poured in over £100m to a company which claimed that it had world-beating technology ended up with just £600. No, not £600 each - that was spread among the owners of 5.3 million ordinary shares and 1.9 million A shares.
Last week, employees who owned stock options received a letter from Spinvox giving them the sad news about the value of their stake in the business following the sale. Here's an extract:
"Under the Transaction, a total of around £600 was paid for all the shares, with holders of A shares being paid in priority to ordinary shareholders. Ordinary shareholders received no payment for the transfer of their shares and therefore any of the options that you held under the above Plans were "underwater" immediately prior to the Transaction, that is, the exercise price of the options was higher than the value of the shares that you would acquire on exercise of the option. This means you would not have realised any financial value from your options at the time of the Transaction."
The likes of Carphone Warehouse and Goldman Sachs have probably not even bothered to collect their few pounds. As for Spinvox's co-founders Christina Domecq and Daniel Doulton, they also appear to have got nothing. So who got that £64m - or at least the £40m or so that was in cash rather than shares?
The answer is that it went to pay off the emergency loans that Spinvox received as it struggled to stay afloat last summer. It's quite the most spectacular destruction of shareholder value I've seen since, ooh, the dot.com collapse of 2000.
I've also learned something interesting about Nuance - just like Spinvox, it relies on human beings to convert voice messages into text. Nuance uses FocusMT, a company based in Bangalore in India for its healthcare products, which transcribe voice notes made by doctors.
It bought the Indian company in 2007, and says it has since diversified its business into all its speech-related activities, including voicemail transcription.
When I got in touch with Nuance, the company stressed that it had always been open about the involvement of humans: "We have call centres based in India and we've talked about that for years," said John Pollard from Nuance.
But he insisted that there was a high and increasing level of automation, with a large number of messages that did not need quality checking by human agents.
Nuance is currently looking at the call centres used by Spinvox around the world, and working out which of them it will need to keep on.
There are data protection issues here for Spinvox customers. Not only do all their existing messages now reside with Nuance - though I'm told that data will not be taken off to the United States - but their new messages could be going over to India for transcription.
The Information Commissioner's office tells me this is OK, as long as Nuance tells customers about it.
Spinvox insiders tell me the firm had made rapid progress in the last few months towards automation. But it still appeared to be losing money hand over fist - otherwise it would not have had to seek a sale to Nuance on such poor terms.
The question now is whether a combination of the British and American technology can produce a voicemail-to-text business that actually makes money.