Tech listings boost Australian IPO market

Australia's affection for tech public offers has continued unabated, regardless of whether they enter via the front door or the back door.
Written by Chris Duckett, Contributor

More than a third of initial public offers on the ASX in the first half of 2016 have come from the information technology sector, according to investment technology firm OnMarket BookBuilds.

The popularity of the local technology sector has run strong even as investors on Wall Street have turned nervous about startup valuations. More than 100 technology companies have debuted on the ASX in the past two years, particularly through a wave of backdoor listings.

In June, worries about the financial prospects of music streaming company Guvera forced the ASX to block its high profile IPO plans, and has prompted a review into tightening of listing rules for technology companies.

Later in the month, the Guvera Australia and Guv Services entered voluntary administration. The Australian Financial Review reported the company owed AU$15 million to creditors, the biggest of which was the Australian Tax Office, and staff were not paid their superannuation entitlements.

The music streaming platform currently has over 14 million users across 10 countries, with about half of Guvera's users based in India, where the company claims to be the first international streaming platform to enter the digital music market.

For the half year ended June 30, 12 of 34 listings on the ASX were by IT companies, and another five from each of the financial and materials sectors.

However, investors who sunk their money in tech are likely to be disappointed, with its listings yielding an average of just a 3.3 percent price increase over the period.

On the other hand, shares of consumer staples and materials market entrants yielded price gains of 123 percent and 55.3 percent respectively, OnMarket BookBuilds said in a report.

The industrials sector dominated the IPO listings by amounts raised, cornering a third of total funds, with plumbings manufacturer Reliance Worldwide leading the charts with a AU$918.8 million raising.

Last Thursday, online retailer Kogan floated on the ASX at a listing price of AU$1.80, which dropped as low as AU$1.50 the next day, and closed at AU$1.60 yesterday.

Kogan launched an IPO of AU$50 million in mid-June, however the public were shunned in the offer. Instead, the company had an institutional offer, broker firm offer, priority offer, and an employee offer.

Reverse takeovers, particularly of resources companies, have been a popular way for companies to list on the ASX.

In May, video technology development company Linius Technologies appeared on the exchange after a reverse takeover of Firestrike Resources which saw Linius raise AU$3.5 million at a AU$25.6 million valuation. Linius is currently trading at AU$0.08 per share, giving it a market capitalisation of AU$38 million.

Digital identification and verification firm TikForce finalised its reverse takeover of Palace Resources in April, with the Perth-based company launching on the ASX after raising AU$4.5 million to complete the backdoor listing. TikForce has a market capitalisation of AU$9.4 million.

At the start of the year, Canadian data security firm Zyber Secure Mobile Solutions hit the ASX with a AU$3 million backdoor listing. A week later, technology and entertainment company MSM commenced trading on the ASX after successfully raising AU$7 million as part of a reverse takeover of Minerals Corporation.

Zyber has a market capitalisation of AU$3.7 million, while MSM sits with capitialisation of AU$38.8 million

With AAP

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