The planned IPO of music streaming company Guvera on the Australian Stock Exchange has sent a terrifying chill through the investment community with some financial experts wondering exactly what the ASX is doing.
Compared to most markets the Australian stock market is lax allowing floats to happen regularly with a “buyer beware” emphasis placed back on the investor.
Guvera is attempting to float basing its valuation at $1.3 billion despite revenues of $1.2 million in the 2015 financial year and losses of $80 million already in the 2015-2016 financial year.
Furthermore the Australian Financial Review’s Tony Boyd says the IPO is “a last resort funding option” for Guvera stating “Guvera contains some dirty linen, no revenue forecasts and a heap of warnings about the investment risks” but then adds “The reason why potential investors should be wary of Guvera is because so little of the proceeds will be going towards building the business”.
Boyd points out that Guvera is only using 18% for its funds for expansion. The majority is to pay down debt and be used for licensing fees.
The float is a potential disaster waiting to happen.
Atlassian founder Mike Cannon-Brookes tweeted that “ASX shouldn’t allow this stuff”.
Was pitched. Read Guvera prospectus. Terrified. $180m raised, <1m MAU? No revs? Little growth? Dodgy loans? ASX shouldn’t allow this stuff.
— Mike Cannon-Brookes (@mcannonbrookes) June 4, 2016
Cannon-Brookes also criticised the ASX saying it shouldn’t be a “funding source of a last resort”.
The Guvera prospectus was lodged with the ASX last Friday. The ASX could take at least four weeks to assess the document.
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