What is an IPO?
IPO stands for Initial Public Offering and it refers to the process of offering shares of a private company to the public, for the very first time. Well established firms use it to let shareholders exit few/all ownership by selling stocks to the public whereas growing firms can generate requisite funds.
Process of an IPO:
The events that take place in an IPO are discussed below:
- An external IPO team is formed of underwriters, lawyers,?accountants, and the?Securities and Exchange Commission?experts.
- Company information is assembled along with the financial performance and expected future operations. This is basically part of the company?prospectus, and is screened vigilantly once done.
- The?financial reports?undergo audit sessions and inferred post results.
- The company finally submits the prospectus and other forms to the SEC, post which a final offering date is set.
Advantages of being listed:
The main reason companies decide to go public is to raise money. Apart from the prestige and brand equity that a company gets when their stock is listed on any stock exchange, there are quite a few advantages of being public on a stock exchange.
Let us look at pros of being listed on a stock exchange:
- The risk of ownership is spread across a large group of shareholders.
- Reduction of the overall cost of capital, better negotiating stand with banks in turn reducing the interest costs on any existing debt.
- Ability to raise additional funds.
- Listed companies can offer securities in the acquisition of other companies.
- Stock and stock options programs can be offered to employees.
- Better market exposure- with an ability to attract mutual and hedge funds, market makers and institutional traders.
- Indirect advertising from the fees paid to the exchange comes in complementary for most of the significant exchanges.
Disadvantages of being listed:
- Company is bound to reveal financial, tax, accounting and other details.
- Law, market and account related costs pace up.
- Management needs to dedicate extra time, attention and effort towards reporting.
- New shareholders pose stronger agency issues and loss of control.
- There is constant risk that the anticipated funding might not be raised, which makes the stock price go down post the IPO.
- Strategies to pace up the value of shares, for example, using excessive debt to?buy back stock, raises the risk and causes instability.
The Australian Securities exchange has had quite a few listings off late. Below mentioned are few of these:
- PKS Holdings Limited (ASX: PKS)- listed on 6th June 2019
- Renergen Limited (ASX: RLT)- listed on 6th June 2019
- Splitit Payments Limited (ASX: SPT)- listed on 29th January 2019
- Black Dragon Gold Corp. (ASX: BDG)?? listed on 29th August 2018
- Sultan Resources Ltd (ASX: SLZ)?? listed on 16th August 2018
5 upcoming listings on ASX:
Let us now look at few upcoming listings on ASX along with their recent updates:
- Australian Nutrition & Sports Limited (Proposed ASX Code: AN1)
AN1 is a nutrition and wellness company which makes nutritional products in Australia and was founded in 2006 by Tom Lashan. It has operations in Australia and Asia and plans on expanding further in Asia. The company specialises in nutrition and wellness supplements along with baby milk formula.
Few company products (Source: Company website)
On 12th April 2019, the company announced St Kilda Football Club as its official partner. Chris Larkins, Saints General Manager of Commercial stated that the company as a partner, would be of great help in the Chinese market.
The company had lodged its replacement prospectus recently to issue 40 million Shares at an issue price of $0.20 each, to raise up to $8 million before costs with a minimum subscription required to raise at least $5 million.
- Invex Therapeutics Ltd (Proposed ASX Code: IXC)
IXC is a bio-pharma company focused on the re-purposing of an existent approved drug called Exenatide, which is meant to treat neurological conditions derived from or involving raised intracranial pressure, like traumatic brain injury, acute stroke and Idiopathic Intracranial Hypertension.
To repurpose and commercialise Exenatide, the company is raising $10,000,000 in new funds. It would have rights to accept oversubscriptions up to an additional $2,000,000.
Other activities for this commercialisation include:
- Completion of the reformulation of Exenatide.
- Bridging toxicology.
- Patent costs.
- Complete a 16 patient Proof of Concept Phase II clinical study in IIH.
- Initiate Proof of Concept clinical studies in other indications.
- Initiate a Phase II clinical study to support approval for Exenatide in IIH in the US and Europe.
- Administration costs, working capital and the costs of the Offer.
As per the company?s replacement prospectus dated 29th May 2019, there would be an offer of up to 25,000,000 Shares at an issue price of $0.40 per Share to raise up to $10,000,000. Oversubscriptions of up to a further 5,000,000 Shares at an issue price of $0.40 per Share to raise up to a further $2,000,000 may be accepted.
Prospectus details (Source: Company website)
- Renergen Limited (ASX: RLT)
Listed on ASX on 6th June 2019, RLT is an emerging Producer of helium and liquefied natural gas. In the South African region, it has the foremost and only production right of onshore petroleum. The company is also listed on Johannesburg?s AltX exchange.
The initial offer raised $10 million with oversubscriptions via the issue of 12,500,000 CDIs at a subscription priced at $0.80. The funds raised through the offer would be used for additional exploration and further expansion of the Virginia Gas Project, which is deemed to be amongst the richest helium concentrations of the world.
Apart from this, the company also appointed Dr David King on its Board as the independent, non-executive director.
Besides this, the company announced on 5 June 2019, that it wished to introduce a long-term incentive, namely a Bonus Share Plan to align employee and shareholder interests and to incentivise and retain participants.
Share Price Information:
The stock of the company was trading at A$0.880, down by 3.825% (as on 12 June 2019, 1:44 PM AEST). The company has a market capitalization of A$103.06 million, a total of 77,250 shares had been traded.
- Victory Offices Limited (Proposed ASX Code: VOL)
Awaiting listing on ASX, VOL is a workspace provider aiming to make tailored and custom packages for individuals and their business, giving them fully equipped, functional and professional workspaces that can be hired or leased as desired. The company delivers executive 6-star services, making its count in the list of the most flexible workspace providers?in Australia. The company also provides serviced offices, co working spaces, virtual offices and meeting spaces. Victory Offices currently has 19 locations (as at the date of this Prospectus) with 14 in Melbourne, three in Sydney and one each in Brisbane and Perth.
The company recently released its prospectus and provided the key highlights as follows:
Key Offer Information, Source-Company?s Prospectus
On the financial end, as on 31 December 2018, on a pro forma basis (assuming successful completion of the Offer), Victory Offices had cash and cash equivalents of $27.4 million.
Key Financial Metrics, Source: Company?s Prospectus
- Tubi Limited (Proposed ASX Code: 2BE)
Tubi Limited is a plastic pipe specialist company which also is an operations innovator, founded in 2009 by Marcello Russo. The company caters to the irrigation, power, mining, water infrastructure, shale gas and LNG and pipe relining sectors. The company functions in the US and New Zealand regions and is headquartered in Australia.
The company?s unique products are Mobile Modular Extrusion plant?and the Tubi Reeling System.
Few other company products are:
- Tubi Mobile Modular Extrusion
- Tubi HDPE
- Tubi Large Bore Reeling
- Tubi Corrugated
- Tubi Stringing
- Tubi HDPE 40bar
As per its prospectus, the company is offering an initial public offering of up to 28,800,000 ordinary shares at $0.20 per share to raise $5,760,000. The trading of these shares would begin on 14th June 2019 on ASX.
It was stated that there are 3 key strategies that the company follows:
- Technology development.
- Customer contracts.
- Strategic partnerships.
The company?s existing customers include MPS Enterprises Inc and Iplex. It targets HDPE pipe users, distributors and/or manufacturers with huge volume requirements in isolated areas where traditional fixed plants are more than 250km away from demand.
The company?s revenue increased by $7.1 million in 1H19, given the higher selling prices and higher production levels. Below is a snapshot of 1H19 compared to 1H18 as provided in the company?s prospectus:
Financial Summary (Source: Company website)
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