The Australian Stock Exchange has rejected plans by streaming company Guvera to float on the ASX.
Guvera valued itself at an outrageous $1.3 billion and hoped to raise $50 million to $100 million of public money by floating on the ASX.
The company reported revenues of only $1.2 million on 2015 with losses $81.1 million last year and a loss of $29 million in the previous year.
Had the ASX allowed the float Guvera would have used a large proportion of the capital to pay off debt.
On Friday the ASX announced, “We write to advise that the ASX has exercised its discretion to refuse the applicant admission to the official list.”
The float was not without controversy. CEO Darren Herft also operated the financial services company attached to the raising of over $180 million for Guvera in recent years. His company pocketed over $20 million in fees for the exercise.
Guvera’s reach was also questionable. While the company claims to have over 14 million registered users it is estimated that around 90% did not return after first using the service.
Guvera’s business model was also flawed. The company initially offered free music to consumers paid for by the advertiser. On a pure CPM rate, advertisers appeared to be paying over 100 times standard advertising rates to reach audience through the service. Guvera did not make financial sense for brands as an advertising platform. It also did not make sense for consumers as they were limited in choice.
Guvera has around 3000 shareholders who now risk losing their investment if the company goes under. Without the float, it is unlikely that Guvera can continue as a going concern. With the float it would have been on borrowed time and would have had to raise that amount of capital again before the end of this year.
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