Australian music streaming service Guvera is aiming for an $80 million IPO

India and streaming Bollywood music is a key part of Guvera’s strategy. Photo: Lisa Maree Williams/Getty Images

Gold Coast-based music streaming platform Guvera is hoping to raise $80 million via $1 shares in an initial public offering (IPO), lodging its prospectus with ASIC.

The business, which launched in 2010, and last year raised $100 million as part of expansion plans in India. It claims to have 14 million users in 10 countries, with more than 30 million tracks licensed globally. The business has targeted India’s Bollywood music market.

The company says $80 million float will give Guvera an indicative market cap of around $588 million, with a total valuation of $1.3 billion, even higher than claimsthe company could be worth $1 billion just a few months earlier.

As the AFR’s Tony Boyd pointed out in February, comparing the business to rival Pandora, if the latter’s revenue multiple was applied to Guvera, the business would be worth $3 million, based on revenue of $1.5 million in the second half of 2015.

Guvera is hoping to take on streaming giants Spotify and Pandora. Its revenue comes primarily from advertising, and like Spotify, users can pay to subscribe to the otherwise free service to skip the ads. In FY2015, Guvera’s subscription revenue accounted for 6.22% of Guvera’s global revenue and subscription Users made up less than 1% of its total membership database. It’s also seeking to build revenue from branding agreements with companies such as Virgin Mobile Australia, Priceline Pharmacy and Goodlife Health Clubs.

Guvera’s brand strategy director, Max Hegerman, said offering a brand-funded model of entertainment using music to connect with consumers set the business apart from its competitors.

“Our brand channel advertising solution helps brands engage with their target audience on a more meaningful level, which in turn provides Guvera’s users with a wide variety of music and editorial content that they can enjoy in a minimally-disruptive way,” he said.

The business is pitching itself as a brand-funded streaming service and also received $10 million in Commonwealth government R&D grants in recent years.

Guvera chairman Phil Quartararo on the launch of the prospectus that the company’s primary focus on mobile digital advertising was the key to future success.

“Guvera’s revenue model replicates that of a major social media platform. The provision of music is a mass-market service, and I believe Guvera is the best positioned music company to take advantage of this mobile advertising explosion,” he said.

Last year the business turned over $1.2 million and lost $81 million, having bought UK streaming service Blinkbox from retailer Tesco for $650,000, only to have the business fail and cost Guvera $2.3 million in losses.

It expects similar revenue levels in FY2016, according to the prospectus, with a loss of $55.7 million for the first six months. In FY2014, Guvera had revenue of $400,000, with a $29.6 million loss. The business relaunched in 2013 off the back of a $60 million raise.

Guvera’s CEO, Darren Herft, also owns the private equity firm AMMA, which has been involved in previous capital raises and is once again central to the IPO.

The prospectus states: “Guvera did not have any capital raising or debt financing skills or experience in-house, so outsourced this critical function to AMMA.”

Guvera has paid a total of $22.485 million in commissions to AMMA on previous capital raising of $180 million. That agreement was terminated with the lodgement of the prospectus.

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, as well as “reasonable costs, charges and expenses of and incidental to the Services incurred by AMMA”.

AMMA Private Equity is underwriting $10 million of the IPO, conditional on Guvera raising $30 million. Melbourne-based D H Flinders Corporate Advisory is acting as the lead manager to Guvera for the IPO.

The IPO will also accept oversubscriptions for a further 20 million shares.

The offer closes on July 8 and if successful, will list on July 18.

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