HotCopper launches IPO without MD

Investor chat forum HotCopper is aiming to list on the ASX in September after lodging a prospectus that reveals a big sell-down by existing shareholders and an expected loss in the current financial year, and makes no mention of outgoing managing director Greg D’Arcy.

The HotCopper prospectus was lodged this week with the Australian Securities and Investments Commission, after months of market chatter about the planned float.

It states that an executive search has commenced to find a managing director, as this position will become vacant at the end of July.

It does not refer by name to Mr D’Arcy, who has been managing director of the web-based business for the past eight years, or why he is leaving the position.

The company is led by Sydney-based chairman Steve James, who has a background in online stockbroking and currently works for the Commonwealth Bank.

His fellow directors are Alec Pismiris and Geoffrey Reilly, who are also directors of lead manager Somers & Partners.

The prospectus confirms previously reported plans for HotCopper Holdings to raise $12.2 million in new capital.

Of this amount, $10.2 million will be paid to the current owners of the HotCopper business, which is held through private company Report Card Pty Ltd.

After paying offer costs of $317,000, the listed company will retain net proceeds of $1.7 million to fund the business.

The current owners, including investors David Argyle and Ric Indisrie and CPS Capital Group director Tony Cunningham, will retain a 44 per cent stake in the listed company.

The $10.2 million to be paid to the current owners is on top of $517,000 in dividends paid earlier this year.

However, the company has stated it does not expect to pay another dividend in the 2016 or 2017 financial years.

HotCopper’s initial public offering follows substantial growth in web site traffic, with unique visitors increasing from 217,000 in January 2013 to 623,000 in May 2016.

This has translated to solid growth in sales revenue, which is forecast to reach $2.58 million in the year to June 2016 and $2.69 million in the year to June 2017.

However, net profit is expected to deteriorate from $593,000 in FY15 to $527,000 in FY16, before slumping to a net loss of $609,000 in FY17.

The decline is mainly due to a big increase in ‘other expenses’, which are largely not explained, and an options expense of $975,000 in FY17.

HotCopper’s revenue is sourced almost entirely from advertising, including traditional banner advertising and email campaigns to the chat forum’s users, who are typically active stock market traders.

The company plans to investigate new revenue raising opportunities, including its use as a distribution platform for company research and capital raisings by listed companies.

It is also evaluating the potential to offer a premium, paid subscription service.

It has recently paid $60,000 to a company associated with Mr Cunningham, in order to obtain full ownership of private company 708Placements.

708 is developing a business model that is based on building a register of sophisticated investors and using this to facilitate investment opportunities.

Its plan is to earn commission income tied to any funds raised via that register.

To boost services for existing customers, HotCopper is developing mobile apps for iPhones and Android devices, while also developing a platform to give members a greater depth of information and market data.

Hot Copper was established in 1994 and listed on the ASX in 1999, only to be bought soon after by Bourse Data, which in turn was acquired by St George Bank.

Mr Cunningham and other investors reacquired the business in 2004.