Australian data security company Covata is about to launch a reverse takeover of uranium exploration company Prime Minerals as it moves to list on the ASX.
Founded by current executive chairman Trent Telford in October 2007, Covata is looking to raise up to $10 million in the RTO as it aims to grow its US operations.
Leading US growth is the company’s boss, former FBI deputy director Chuck Archer.
Before Archer was the boss of the soon-to-be-listed tech company he led an interesting career. Working at the FBI during the Clinton administration, he climbed the ranks to be in charge of the FBI’s Criminal Justice Information Services Division.
During his time at the FBI, Archer attained a top security clearance, and just like they do in the movies, he took – and passed – polygraph tests.
“I had unlimited spending authority at the FBI,” he said. “In my division I had 3000 employees and 600 contractors.”
But he hit the eject button before the bureau’s mandatory 55-year-old retirement age kicked in.
Archer then protected a number of assets and properties belonging to the Bush family and Kuwaiti royal family.
About three-and-a-half years ago he received a phone call from a venture company requesting he take a look at some Australian technology to see if it had potential in the US.
The tech was Covata’s data protection software and he eventually joined its board before becoming its CEO in September 2013.
The company, which already has an interesting shareholder register, including TPG which has previously tipped $10 million into Covata, is now preparing to list onto the ASX via a reverse takeover.
Telford said a lack of investment appetite in the mining sector has made it a good time to run a tech backdoor listing on the ASX – and there’s been a wave of them this year. More on that here.
“If you tried to do a tech backdoor listing three years ago, even two-and-a-half years ago, you wouldn’t have a lot of success, It would be more difficult,” he said.
“The benefit of the RTO is the regulator essentially puts the responsibility of the transaction back onto the shareholders.”
Reverse listing has also enabled Covata to take $2.5 million in convertible notes upfront.
“There’s less appetite to write a cheque for $2.5 million if you’re going to end up stuck in a private company,” he said.
“It allowed us to raise funds now, prior to the transactions.”
Other companies running reverse takeovers this year have claimed it’s a cheaper way to list but Telford said in his experience it’s “no different” because you still need to do due diligence on the listed vehicle, you’ve got to put together a prospectus and you’ve got to do an independent experts’ report.
On choosing Prime Minerals and the ASX, Telford said he looked for shareholder support, cash in the bank and its relationships with brokers.
“It’s easy, relatively speaking to step onto the ASX and then at a time that’s appropriate step it up [to NASDAQ],” he said, adding it’s dangerous to list onto bigger cap markets too early.
“We want to get that stock price up substantially,” Archer added.