The planned IPO of Australian music streaming service Guvera on the Australian Stock Exchange (ASX) has got local investors and tech leaders “terrified”, even claiming it highlights the irresponsible standards of the ASX.
As StartupSmart reports, the long beleaguered streaming service announced last week it would be going after an ambitious $80 million Initial Public Offering, selling shares to the public at a price of just $1.00 per share.
Guvera has had a difficult time of late, recording only $1.2 million in revenue during the 2015 financial year, with a net loss of more than $80 million. The company’s net loss for the first half of the 2016 financial year was $55.7 million.
As a result, most of the money raised during the IPO will go to financing the company’s debts and for licensing fees. According to the Financial Review, only 18 percent of the money will actually go into the business.
This is despite claims in the company’s prospectus that they will “continue to increase investment in Guvera’s business”. However, the prospectus did acknowledge the company’s losses and predicted further losses for the future.
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
Many have criticised Guvera’s IPO plans, with the Financial Review labelling the move “a last resort funding option” for the company, which “contains some dirty linen, no revenue forecasts and a heap of warnings about the investment risks”.
FR aren’t the only ones concerned about the prospect of a Guvera IPO. Mike Cannon-Brookes, founder of software company Atlassian, said he was “terrified” after reading the Guvera prospectus and added, “ASX shouldn’t allow this stuff.”
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The Australian stock market is notoriously lenient with allowing companies to attempt IPOs or ‘float’, taking a “buyer beware” attitude and placing the onus of research and accountability on the individual investor.
In addition to the FR, popular investment advice site The Motley Fool has penned an article titled ‘Why you need to avoid the Guvera IPO’, alleging the company, among other things, grossly misrepresents its number of users.
Noting how the service has invested in companies owned by its chairman Darren Herft, the outlet wrote, “If there’s a grain of truth to the media reports, then there are simply far too many unquantifiable risks for retail investors to go anywhere near Guvera.”
