Initial Public Offering (IPO) Details: Guvera, the music streaming platform based on the Gold Coast , plans to raise up to $ 80 million through an IPO of $ 1 shares. The business, established in 2010, had raised $ 100 million last year to fund its expansion plans in India. It now says that it has 14 million users spread across 10 countries and has licensed more than 30 million tracks globally and targets the Bollywood music market from India. It says that the $ 80 million IPO will provide an indicative market capitalisation with a total valuation of around $ 1.3 billion.
 

AUS Registered Users (Source: Company Prospectus)
 
Positives: The company, which is taking on streaming giants such as Pandora and Spotify, derives its revenues mainly from advertising though, like the Spotify business model, users can pay subscriptions for the otherwise free service to bypass the advertising. In FY 2015, this subscription revenue amounted to only six points to 2% of global revenues and users accounted for less than 1% of the database of total memberships. It is also planning to generate revenues from branding agreements with companies like Virgin Mobile Australia, Goodlife Health Club and Priceline Pharmacy. Brand strategy director Max Hegerman explains that what distinguishes the business from its competition is a brand funded model of entertainment based on music to connect with users. The advertising solutions offered assist brands in engaging with their target audiences on a meaningful basis and provides users a wide range of music and content which can be enjoyed with minimum disruption. The company has also received $ 10 million in Commonwealth government research and development grants in the last few years. Chairman Phil Quartararo says that the primary focus of the company and the key to future success would be the mobile digital advertising business. The revenue model is similar to major social media platforms because the music business is a mass market service and he believes that Guvera is the music company that is most favourably positioned to take advantage of the explosion in mobile advertising.
 
The Hiccups: Last year, revenues came to $ 1.2 million, with losses of $ 81 million, including $ 2.3 million on the UK streaming service Blinkbox for which it paid retailer Tesco about $ 650,000. Revenue levels are expected to be around the same in FY 2016, according to the prospectus with losses of $ 55.7 million for the first six months. The revenue forecasts are not very clearly stated in the prospectus and investment risks do hover around given the lack of fundamental information. The company only intends to use about 18% of the funds raised for sales expansion. The plan to spend only $1.3 million of the funds in US as opposed to $4.8 million to be spent in the Asia Pacific and $800,000 on platform development looks little doubtful given the US market strength. Guvera’s IPO is critical as the proceeds have also been earmarked for taking care of creditor repayments, retirement of debt, and transaction costs.
 

Offer Details (Source: Company Prospectus)
 
Many experts believe that the valuation and quality of Australian tech companies are considered to be suspicious and that investments such as this IPO are always going to be high risk, though, in all fairness, a successful company with strong fundamentals can yield spectacular results. The ASX is also now considering changes in its listing regulations that would filter out many early-stage speculative tech companies looking for listings basis some easy grounds.

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