Guvera IPO on hold as ASIC and ASX review offer

The Australian Securities and Investments Commission (ASIC) has blocked potential investors from backing Australian music streaming service Guvera.

According to the Australian Financial Review, ASIC has this week extended the exposure period on Guvera’s Initial Public Offer (IPO), thus stopping investors from taking the offer for another seven days.

Guvera lodged its prospectuslast week, launching an IPO of up to 80 million shares at an issue price of $1.00 per share. The company said it has the ability to accept oversubscriptions for a further 20 million shares.

Since then Guvera has faced heavy criticism from Australia’s technology industry heavyweights.Crucially, the platform is valued at 1.3 billion but it lost $81.1 million in the last financial year on revenue of 1.2 million. One of Australia’s leading entrepreneurs and a co-founder of Atlassian, Mike Cannon Brookes voiced his concerns over Guvera’s $1.3 billion floatlate last week. He dubbed ASX’s authorisation of Guvera’s IPO “terrifying”.

Compounding the issue, Allan Goldin from the Australian Shareholders Association (ASA) spoke to 2GB last night about his concerns regarding the IPO.

“We can’t understand how a company that looks like this, is at the stage that they’re very close to be offered to share holders to go and put their money into it,” he said.

Goldin said Guvera’s valuation is also surprising when compared to streaming rival Spotify, which is still operating at a loss despite its size.In 2015 Spotify generated €1.945 billion in total revenue, and about €184 million in losses.

“If you look at a Spotify, or an Uber, that isn’t making money yet, you know it very possibly will soon; because they have big revenues, they’re getting the mass, they’re close. This one [Guvera], it’s a long way.”

Guvera has raised $185 million from around 3000 “sophisticated investors”, but the IPO comes afterits plans to raise another $100million privatelyvia investment bank JP Morganfell over.

It should also be noted that all pre-IPO funding has been coordinated by AMMA Private Equity, which was co-founded by Guvera co-founder and CEO Darren Herft. AMMA has also agreed to underwrite $10 million of the funds raised under the offer, on the condition that Guvera raises $30 million.

In a statement, ASA director GeoffreyBoyd warned potential investors: “This is a good example of how important it is for shareholders to read offer documents carefully, including the business risks and financial information, so that they can fully understand the risks associated with the business they are investing in.”

The Australian Securities Exchange (ASX) will list companies on the local sharemarket only if ASIC has no objections, but as AFR pointed out, the ASX can block any new float at its own discretion.

TMNreached out to Guvera for comment and was told to expect a response.