Guvera’s future in doubt after $1.3 billion IPO blocked by the ASX

Queensland-based music streaming startup Guvera is “reviewing its legal options” after its $1.3 billion initial public offering was blocked by the Australian Securities Exchange last week.

Only a day after Guvera’s updated prospectus was approved by the Australian Securities and Investments Commission, the ASX took the unprecedented move to prevent the tech company from listing.

In a statement provided to StartupSmart, the ASX said the reasons for the block are “confidential”.

“ASX has exercised its discretion to refuse admission to Guvera, based on material contained in Guvera’s application for admission,” the ASX said.

“ASX must be satisfied that a company is appropriate to be listed on ASX and can exercise its discretion to refuse admission even where a company otherwise satisfies all of the specific conditions for admission.”

Guvera has confirmed that it is meeting with ASX representatives on Tuesday to discuss the decision and is also considering legal options.

“Guvera is currently reviewing its legal options and obligations and will be communicating to the market when it is more informed about the position and course of action the Company can take,” the startup said in a statement.

The move by the ASX puts Guvera’s future in doubt, with the company’s own prospectus outlining the risks if this capital wasn’t raised. A large majority of the funding from the IPO was to be used to repay debt and creditors.

“Should Guvera be unable to raise sufficient capital under the prospectus, there is a significant uncertainty whether Guvera will be able to continue as a going concern and therefore whether it will be able to pay its debts as and when they fall due,” the original prospectus said.

The updated prospectus stated Guvera was looking to float up to 80 million shares at an issue price of $1.00 per share and a minimum subscription of 50 million shares.

The startup said the IPO could be oversubscribed by up to 20 million shares, which would have valued the company at more than $1.3 billion.

Guvera’s IPO plans have been at the centre of controversy since it released its prospectus and the accompanying financial information, showing the company had revenue of $1.2 million for the 2015 financial year and corresponding net loss of more than $80 million.

Guvera’s net loss for the first half of 2016 was $55.7 million.

This led several high-profile members of the Australian tech community to label the potential listing as “terrifying” and “horrifying”.

The Australian Shareholders’ Association also signalled its concerns with the public listing.

“It is really concerning that a loss-making company which expects operating losses and negative operating cash flow to continue into the future may list on the ASX, particularly where its ongoing viability is dependent on the proceeds from the IPO,” ASA director Geoffrey Bowd said.

Guvera co-founder Claes Loberg has hit back at the company’s critics on Twitter, saying it has been the “most stressful” week of his life and people need to “look deeper” at the company’s vision and business model.

It seems this is exactly what the ASX has done, saying it has moved to maintain the integrity of the market.

“ASX has an absolute discretion to decide whether or not to admit a company to the official list and to quote its securities,” the ASX said in its statement.

“In exercising its discretion, ASX takes into account the principles on which the listing rules are based, which services 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.”

This article was first published by StartupSmart. Follow StartupSmart on Facebook, Twitter and LinkedIn.