Queensland-based music streaming company Guvera will be forced to find a new source of private equity or may end up in administration after the ASX stopped its float just 24 hours after the company issued a new prospectus with the blessing of the Australian Securities and Investments Commission.
A spokesperson for the ASX told Business Insider the ASX had exercised its discretion to refuse admission, based on material contained in Guvera’s application for admission.
“Specific reasons remain confidential,” he said.
“In exercising its discretion, ASX takes into account the principles on which the Listing Rules are based, which serve the interests of companies and investors in maintaining the reputation of the ASX market.
“These principles include that an entity should satisfy appropriate minimum standards of quality, size and operations and disclose sufficient information about itself before it is admitted to the official list.”
Guvera went looking for up to $100 million in an IPO that valued the business at more than $1.3 billion, despite the fact that it lost $81 million last financial year on revenue of $1.2 million.
The float was widely criticised when the prospectus was released at the start of the month and last night Guvera released a new prospectus last night with 45 changes to it following scrutiny by ASIC.
Part of the criticism included the fact that the Guvera’s CEO, Darren Herft, is also a partner in the private equity business AMMA, which previously raised $185 million for the music company, receiving more than $22 million in commissions in the process. AMMA was underwriting the Guvera float to $10 million, but was also taking 5.75% in commission on any funds it helped raise.
As part of the changes in the new prospectus, the fees and costs associated with the IPO increased by at least $1 million from $6.6-11.3 million to $7.6-11.5 million, and the closing date for the offer was moved back a week.
Other details emerging in the new prospectus included a $4.8 million claim against Guvera by UK-based digital music provider Omnifone, which slid into administration in May. Omnivore served a demand for $2.4 million but Guvera disputes the claims.
Guvera also owes money to APRA AMCOS, the company collecting royalties for musicians and composers, and had entered into a repayment arrangement. The amount was not revealed.
References to Guvera having 14 million registered users were excluded from the replacement prospectus. Guvera does not list active users.
Guvera’s initial plan to raise at least $40 million in the IPO was revised to $50 million, but the new prospectus acknowledged that at that level, the business would still be $14.5 million in debt and would need to raise additional funds within 7-to-9 months to continue.
If the minimum was raised at $1 a share, 71% went to retiring debt or paying back creditors, and 10% for sales expansion.
The company warned in its initial prospectus that if the IPO failed, the business did not have the funds to continue. Guvera lost $55.7 million for the first six months of FY2016.
The ASX wrote to Guvera on Friday afternoon saying it had “exercised its discretion to refuse the applicant”.
The ASX had intervened and blocked floats a number of times, but most instances are not public. A rare recent example prior to Guvera was Bitcoin.