Last year Atlassian co-founder Mike Cannon-Brookes became a billionaire after floating his business on the US stock market, having spent 10 years turning the Australian tech company into a global force.
Last week, Queensland-based music streaming platform Guvera lodged its prospectus for an $80 million initial public offering (IPO).
The $80 million float will give Guvera an indicative market cap of around $AU588 million and $1.3 billion valuation. When Atlassian floated, it was worth $US4.4 billion ($A6 billion).
But the figure Guvera is aiming for appears at odds with the rest of the industry. The AFR used the value of rival business Pandora to calculate how much Guvera would be worth as a like-for-like business. It estimated around $3 million.
Launched in 2010, then relaunched in 2013 off the back of a $60 million raise, Guvera last year raised $100 million as part of expansion plans in India and hopes to take on streaming giants Spotify and Pandora.
Last year the business turned over $1.2 million and lost $81 million, having bought UK streaming service Blinkbox for $650,000, only to see it fail, costing $2.3 million in losses.
According to the prospectus, a loss of $55.7 million was posted for HY2016. The losses for the first 9 months of FY2016 are now at $80 million.
Meanwhile Guvera CEO, Darren Herft’s private equity firm AMMA has benefited from the cash pouring in. Guvera paid $22.485 million in commissions to AMMA on previous capital raising of $180 million. Under the terms of the prospectus, Guvera must pay AMMA a commission of 5.75% of the total of any cash investment received from investors introduced by AMMA during the Offer Period.
AMMA Private Equity is underwriting $10 million of the IPO, conditional on Guvera raising $30 million.
If successful, the IPO will leave Herft with 7.87% of the stock, and founder Claes Loberg with an 11.63% stake, retained for at least two years in escrow. Business Insider has approached Guvera for comment on this story.
When news of the Guvera IPO reached Mike Cannon-Brookes, he was less than impressed, taking to Twitter to say the “ASX shouldn’t allow this stuff”.
Reading the prospectus left him “terrified” he said.
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 wasn’t alone in voicing his concerns.
Blackbird Ventures founder Niki Scevak called the Guvera IPO “horrifying”.
“So horrifying and more $ than entire credible Aussie VC industry // streamer Guvera raising $100m through ASX,” he said on Twitter.
Paul Bassat, the Seek co-founder who last year launched the $200 million VC fund Square Peg Capital, took aim at the ASX for allowing questionable floats.
1 The quality, readiness and valuation of some of the tech companies coming to market is an absolute disgrace.
— Paul Bassat (@PaulBassat) June 1, 2016
“Some advisers and entrepreneurs will make a killing but it will be a zero sum game and retail investors will be the losers,” he said on Twitter.
“Hopefully markets will be able to distinguish between the crap & the high quality tech companies but risk that whole sector will be harmed.”
3 @ASX and NZSX are about only place in the world where companies are listing way too early and often without a real business model
— Paul Bassat (@PaulBassat) June 2, 2016