It’s been eight months since Deezer’s bid to float on the Paris stock exchange was scrapped amid lukewarm interest – and now another music streaming service has seen its attempt to go public hit the wall.
Australian-born Guvera was planning to launch on the ASX stock exchange in its homeland next month.
It 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).
However, on Friday (June 17), the ASX took the near-unprecedented step of blocking loss-making Guvera’s listing.
The move will have left Guvera’s internal top dogs understandably aggrieved – but there are wider implications here for the digital music market.
With Deezer’s rejection in Paris last year and Pandora 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?
The Swedish service has just hired a Wall Street veteran, Paul Vogel, as its new head of Investor Relations; a sure sign that it is getting its ducks in a row for going public.
Vogel will report to another old hand at taking companies onto the stock market; former Netflix exec Barry McCarthy – now Spotify’s CFO.
Guvera posted an AU$81.1m (US $61.2m) net loss in its latest fiscal year to end of July 2015 – and a FY 2014 net loss of AU$29.4m (US $22.4m).
In the first three months of this year alone, Guvera recorded a net loss of AUS $25.5 million (US $19m) – though this figure does include money spent on setting up the IPO process.
Experts in the Australian market now suggest that, should an IPO remain a dead-end for Guvera, its management team will be forced to consider entering administration.
That would be bad news for the music business – and not just because Guvera claims to have 14 million users worldwide.
Guvera, which has raised more than AUS $180m (US $131m) in the past seven years, owes creditors – including the music labels – millions of dollars.
Following a failed attempt at raising AUS $100m (US $78m) in private equity funds from a US bank in April last year, Guvera agreed a repayment programme with key suppliers and creditors of AUS $19.5m (US $14m).
(This figure also included a liability to the Australian Taxation Office of approximately AUS $0.8 million and a superannuation liability of AUS $0.3 million.)
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...”
It’s important to point out that 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 good enough for the stock exchange’s watchdogs.
“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,” said a spokesperson for the Australian exchange following Guvera’s rejection.
“In exercising its discretion, ASX takes into account the principles on which the Listing Rules are based, which serve the interests of companies and investors in maintaining the reputation of the ASX market.”Music Business Worldwide