Updater privatisation plan splits investors
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Updater chief executive David Greenberg is ditching the ASX in favour of US venture funds. Supplied
Investors in Updater are set for a confrontation after the company's bold plan
to quit the ASX and seek Silicon Valley riches as a private company was unveiled to a mixed reception.
The $645 million listed tech play that provides services to Americans moving homes, declared it would seek to privatise after interest from international venture capital funds. The move allows smaller shareholders to either sell via a buy-back, initially limited to $10 million of shares, or remain invested in the private business.
The shares rose 1.7 per cent to $1.21.
Updater is counting on the additional funds it can access as a private company to accelerate its growth plans, which will be less dilutive to current investors than a secondary ASX raising.
Thorney Investment's Alex Waislitz,
an early backer of Updater, thinks the venture capital injection will allow the business "to turbocharge its expansion plans in the US".
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"Provided management continues to deliver, I would expect to see them raising hundreds of millions of dollars at a valuation of $US1 billion or more in the near future," he said. Further, the move made sense given the liquidity in the private tech market, and may be replicated by other ASX tech companies.
But other shareholders indicated they would challenge the plan.
IFM Investors' Neil Carter said Updater was on the verge of "demonstrating the real revenue potential" of the business and pointed to encouraging purchase rate numbers where more than 8 per cent of users were buying pay TV or internet services.
"That is incredibly valuable to pay TV companies that pay hundreds of dollars to acquire customers," he said. "We are just starting the monetisation phase, which should be an inflection point for the shares."
Quickest means
Hedge fund manager
John Deniz of Paragon, who is long Updater, saw privatisation as the quickest means to latch on to the opportunity the company has carved out.
"Automating and capturing the US moving market, like predecessors in many other markets, the first mover if done right takes all and [Updater] is the company in the position to do this. They can be the realestate.com.au of moving in the United States.
"Achieving this goal fast is exciting and can be expedited by going private and raising the war chest needed."
The company listed on the ASX in 2015 and has gained more than fivefold in value. But the stock has traded flat over the last year as the
market waits to see if it can deliver its stated target of $US19 million ($26 million) to $US23 million of revenue, which it reaffirmed on Wednesday.
Mr Carter said there was no compelling reason for Updater to head to the US. He also rejected the notion that local stock market investors undervalued technology companies, pointing to Wisetech's current valuation of 15 times sales.
"I hope we can get enough support to keep Updater listed in Australia, and we can still pursue this growth strategy and then look at a dual Nasdaq listing in a few years' time," the IFM fund manager said.
Broker RBC described the privatisation as a "unique situation with limited precedents".
While the business had plans to list in the US, an interim take-private scenario with no control premium was not expected and not all portfolio managers can hold private investments.
A Nasdaq listing in two to three years at $US2 billion was realistic, Mr Deniz said. "We're going to see value creation and a strong uplift over these milestones, so we're going to hold on to as much of the company for as long as we can."
