16/01/2017 - 14:34

New listings getting tougher

16/01/2017 - 14:34

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SPECIAL REPORT: Nearly 70 WA-connected companies listed on the ASX in 2016, but current prospects indicate there will be substantially fewer this year.

Peter Malone spent nearly three years working on the listing of Skin Elements. Photo: Attila Csaszar

Nearly 70 WA-connected companies listed on the ASX in 2016, but current prospects indicate there will be substantially fewer this year.

At first glance, 2016 was a very good year for Western Australian listings on the ASX, with a large number of listings from across the industry spectrum.

Names such as Australis Oil & Gas, Dreamscape Networks, Horizon Gold, Graphex Mining and Zelda Therapeutics illustrate the diversity.

They included several spinout deals, as companies including Metals X, Panoramic Resources and Indiana Resources received value in a separate listing for their non-core assets.

The 69 listings, combining successful IPOs and reverse takeovers, recorded in the BNiQ Search Engine also included several international companies that recognised the ASX as a good market for raising risk capital, and Perth brokers and lawyers as good advisers.

Israel-based Dragontail Systems, Malta-based Neurotech and US-based Race Oncology were examples of this trend.

A majority of last year’s listings – 44 in all – were, in fact, re-listings after reverse takeovers.

Most of these were on the tail end of the tech-stock listing boom that peaked in 2015, when 62 WA-related reverse takeovers were announced (see graph).

Many of the deals announced in 2015 have already fallen by the wayside, with 14 cancelled.

The remaining deals have in many cases taken the better part of a year to navigate the increasingly onerous regulatory framework governing RTOs and attract sufficient investor support.

Ausnet Financial Services is a prime example. It resumed trading on December 28 after raising $5.8 million, a full 12 months after announcing its listing plan.

David Sumich has been through the long saga of a backdoor listing and has no desire to do it again.

Mr Sumich guided Volta Mining through the reverse takeover of eSports Mogul Asia Pacific, and retired as a director shortly after its relisting in November.

“We we’re very happy to have completed the deal but I wouldn’t do another RTO in this market,” he said.

Mr Sumich said there was always strong investor support for eSports Global but the process was made more challenging by the changing regulatory framework.

Skin Elements director Peter Malone had an even longer saga.

His organic skincare company attempted a backdoor listing in 2014 before opting for an IPO, which in itself became a protracted exercise as the ASX and Australian Securities and Investments Commission revised their regulations.

Having made it through the process, Mr Malone is philosophical.

“You have to live with the landscape, we picked 2016 to list and they decided to change the rules,” Mr Malone said.

“But one thing is pleasing, I’ve done so many presentations to the institutions, and it’s a good sell. Our product range is all natural and organic, the (alternative) choice is a synthetic chemical.”

The changed market sentiment is highlighted by the fact just two tech-focused RTO deals have been announced since June.

These include Perth-based Quantify Technology, which is seeking to raise up to $5 million ahead of its backdoor listing via shell company WHL Energy.

Quantify is one of about 10 WA companies currently raising capital ahead of a listing.

The tough state of the market is illustrated by three recent developments.

Heron Resources spin-off Ardea Resources, which is promoting its cobalt prospects, has extended the closing date for its capital raising by a month to January 20.

Similarly, Perth-based tech firm Secure2Go has extended the closing date for its $5 million IPO.

Gold and copper explorer Kalamazoo Resources halved the minimum subscription under its IPO to $5 million, and signed up lead manager DJ Carmichael as underwriter.

With underwriting costs and a lower fundraising target, the expenses of the offer equated to 20.5 per cent of the gross proceeds, compared with 13.1 per cent previously.

The changes enabled Kalamazoo to complete its IPO and achieve a steady listing on the ASX today (Monday January 16).

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