AFR news

Uber effect: Life360stumbles on second day of ASX trading

YolandaRedrup

May 14, 2019 — 12.00am

Local investors appear to have been spooked byUber's poor first day of trade on the NASDAQ, with high-growth social mediacompany Life360 following suit and falling 3.95 per cent on its second day oftrading on the ASX.

The $689 million float of the family tracking appwas the largest tech listing on the ASX since WiseTech in 2016 and popped afterits IPO on Friday, closing up almost 11 per cent from its $4.79 issue priceat $5.31.

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Life360 boss Chris Hulls decided to list hiscompany on the ASX. Arsineh Houspian

But hours later the much anticipated float ofcontroversial ride-sharing giant Uber, one of the biggest high-growthno-profits Silicon Valley tech giants, disappointed investors,reversing 7.6 per cent on its opening price to $US41.57 and continuing to dropin after-hours trading.

Speaking to The Australian FinancialReview Carthona Capital partner and backer of ASX-listed US fintechcompany Credible, Dean Dorrell, said it was possible Uber's performancehad deterred some Life360 investors on Monday, he was confident it couldhave a bright future on the local exchange.

"Uber is already incredibly highly valued andit has some sector-related and company specific stuff affecting it," hesaid.

"Valued at under $1 billion, Life360 still has plenty of growth ahead.

"Our experience with Credible was that it hada reasonable amount of volatility on low trading volumes, but the key was tokeep focused day in and day out and in the long run the share price reflectsthat, while in the short-term you have to deal with volatile fluctuationsthat's part of being a listed company."

Life360 passesfirst day of ASX litmus test

Michael Bailey

The biggest US tech listing since Facebook's 2012float, Uber had hoped to be valued around $US100 billion, but instead came tomarket at a $US80 billion price.

"Uber is genuinely unique ... almost everypotential investor has used Uber as a customer, everyone has an opinion on itsbusiness model and there are very passionate bulls and bears," techinvestor and chairman of ASX-listed sports tech company Catapult Sports, AdirShiffman, said.

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Uber chief Dara Khosrowshahi at the ride-sharinggiant's listing. Bloomberg

"The main bear argument is that the business model will never reach profitability and it is just asubsidy scheme for cheap rides. This war of preconceptions isvery rare in tech IPOs."

While Life360 is also not yet profitable, recordinga net loss of $US20.5 million and revenue of $US32.1 million in 2018, thispales in comparison to Uber's $US11.3 billion of revenue and a $US2 billionloss (on a pro forma basis).

Finding support for pre-profit tech companies onany exchange was a challenging task thanks to the short-term nature ofinvestors, Mr Shiffman said.

"The quarterly disclosure requirements are[also] a particular drain because they focus on time periods that simply don'tmatter in growth companies and are also a huge time sink," he said.

What Life360 means to the ASX

The biggest US tech company to go public on the ASXto date, the performance of Life360 (which has a market capitalisation of$733.8 million) will be closely watched by sub $1 billion US tech companies whoneed capital, have already done the venture capital rounds, but are still toosmall to get a look in on the NASDAQ.

The ASX has been in the US courting companies ofthis nature, making connections with investors and advisors, in the hopes ofluring more of these firms Down Under, as part of a broader play to increasethe diversity of the exchange away from banking and mining.

With aspirations to become like a junior NASDAQ, theASX has substantially lifted the quality of tech companies coming to market inthe past few years. This has occurred in part by tightening the listing rules,but also by speaking to companies it believes are too early-stage to go publicand actively marketing itself to offshore firms.

Mr Dorrell said while selling the ASX to UScompanies wasn't a "slam dunk", offshore companies were now moreaware of the ASX as an option.

However, Mr Shiffman said the exchange's biggestchallenge to becoming a mini NASDAQ would not come from competition fromSingapore or Canada, but from the disruption of sharemarkets.

"It's ironic that just as the ASX is courtingthe world's most exciting disruptors, the next decade is likely to finally seethe arrival of a significant disruption to the stock-exchange model."