News - 20/06/2016

Guvera's IPO blocked

Guvera's IPO blocked

Eight months after Deezer's try to enter the Paris stock exchange failed (basically for lack of interest), another music streaming service has seen its attempt to go public crash. Australian company Guvera, indeed, was planning to launch on the ASX stock exchange in its homeland next month and offered potential IPO launch investors a buy-in price of AUS $1 per share, with a total raise landing between AUS $40m (US $29m) and AUS $80m (US $58m).

But Last Friday (June 17), surprisingly, ASX took the near-unprecedented step of blocking loss-making Guvera's listing. And this is an important detail, since it brings wider implications for the digital music market. As "Music Business Worldwide" points out:

With Deezer's rejection in Paris last year and Pandora recently losing billions in market cap value, are the world's financial markets sending a clear message: that non-profit-making, potentially high-risk music tech stocks should think twice before trying to mount up funds with an IPO?
If so, what does that mean for Spotify's flotation ambitions in the coming months?

Let's not forget that Spotify just hired a Wall Street veteran, Paul Vogel, as its new head of Investor Relations - a sign of a steady will to go public.

Guvera posted a US $61m net loss in its latest fiscal year, to end of July 2015 – and a FY 2014 net loss of US $22m so - should an IPO remain a dead-end for Guvera, its management team will be forced to consider entering administration. In its IPO prospectus, Guvera admitted:

Should Guvera be unable to raise sufficient capital under the Prospectus, there is a significant uncertainty whether [it] will be able to continue as a going concern and therefore, whether it will be able to pay its debts as and when they become due and payable...

As "Music Business Worldwide" reports, Guvera did actually fulfill the fiscal requirements laid down by the ASX - including the submission of an amended prospectus at the end of last week -  but it still wasn't considere good enough for the stock exchange.

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