Guvera, Australia’s most prominent homegrown streaming service, has been a car crash in slow motion for some time now. The fact that there’s been trouble brewing at the company has been one of the industry’s worst kept secrets.
Amid long-running accusations of inflated subscription numbers and haemorrhaging capital, in October 2015 nearly 100 former employees based in the UK took the company to court for £10 million (AUD$21.1 million).
The suit related to the purchase of another media entity, Blinkbox, but it served as a bad omen for Guvera and wouldn’t be the last time that their name showed up in the financial press amidst allegations of mismanagement.
Things finally came to a head this month after the company released a prospectus in preparation for a listing on the Australian Stock Exchange (ASX), which terrified local investors and tech leaders who read the prospectus.
As Tone Deaf reported, the beleaguered streaming service announced 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.
The move followed tough times for the company, which recorded 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 would go to financing the company’s debts and licensing fees. According to the Financial Review, only 18 percent of the money would actually go into the business.
It was no surprise when many, including Mike Cannon-Brookes, founder of software company Atlassian, slammed the ASX for its lax criteria in allowing companies to go after IPOs. With criticism mounting, the ASX acted.
As ABC News reports, whilst the Australian Securities & Investments Commission (ASIC) ‘approved’ Guvera’s prospectus, the ASX blocked the IPO less than 24 hours later. Meanwhile, Guvera was branded a “lemon” by the Australian Shareholders’ Association.
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As Guvera outlined in its own revised prospectus, even if the company raised the minimum of $50 million through its IPO, it would still owe lenders $14.5 million. Naturally, Guvera hit back at the ASX for its lack of transparency in blocking the public offering.
Many analysts are now wondering whether Guvera will be able to survive much longer, though as the Financial Review reports, ASIC has confirmed the company could seek a listing on a different exchange, such as the NSX or the Sydney Stock Exchange.
ASIC commissioner John Price confirmed as much to the Financial Review and said the ASX has “an absolute discretion about who lists on their exchange and who doesn’t”. A big question mark now hangs over Guvera, and its investors stand to lose everything.
