Aussie tech leaders praise decision to block Guvera's public listing

UPDATE: June 27, 2016, 2:04 p.m. AEST In the wake of the Australian Stock Exchange's (ASX) decision to block Guvera's IPO, the company has placed two subsidiaries into voluntary administration. 

On Monday, the embattled company put Guvera Australia Pty Ltd and Guv Services Pty Ltd into administration. "Guvera intends to continue to operate in its home market of Australia and will dedicate its focus, in the short term, on the high growth emerging markets of India and Indonesia as well as the United Arab Emirates (UAE)," it said in an emailed statement.

Key figures in Australia's technology industry have welcomed the Australian Stock Exchange's (ASX) decision Friday to block the public offering of music streaming company Guvera.

The company's pursuit of an initial public offering (IPO) with a valuation of A$1.3 billion was immediately controversial after it was announced in early June, with questions raised about the health of the company's numbers. 

The business made A$1.2 million in revenue in the 2015 Australian financial year with a net loss of A$81.1 million, for example, and some cast doubt on its claim that 14 million users have signed up. Although Guvera argued its brand-funded model -- where companies can pay to be associated with playlists and channels -- set it apart, it faces some stiff competition from industry heavyweights like Spotify, Pandora and Apple Music.

On Friday, the ASX said it had "exercised its discretion" in refusing to allow Guvera to proceed with its IPO. 

"In exercising its discretion, ASX takes into account the principles on which the Listing Rules are based, which serve the interests of companies and investors in maintaining the reputation of the ASX market," an ASX spokesperson said in an emailed statement.

The ASX will be meeting with Guvera Tuesday.

The company has significant debts, according to the Australian Financial Review, meaning a failure to raise money through an IPO could potentially prove fatal. 

"Guvera is currently reviewing its legal options and obligations and will be communicating to the market when it is more informed about the position and course of action the Company can take," it said in an emailed statement.

Given the prospective IPO drew heavy criticism from Australia's tech community, particularly around fears it would undermine the credibility of the ASX and burn investors, the decision has been warmly received by a number of industry leaders.

Mike Cannon-Brookes, the cofounder of Australian workplace software company Atlassian, tweeted Monday the result was a "smart call" and suggested the local technology industry needed to maintain a quality reputation.

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In Cannon-Brookes' tweet, he pushed back on criticism of the ASX made by AMMA Private Equity CEO Paul Jansz, whose company helped raise money for Guvera. According to Fairfax Media, Jansz told shareholders in an email the block showed a "small-minded view" toward tech companies.

"It's typical of a small country and a tragedy to the Australian public and shareholders as Guvera would not be treated like this in an overseas exchange," he wrote.

Guvera's cofounder, Darren Herft, is also the chairman and cofounder of AMMA Private Equity. 

Elaine Stead, investment director at Blue Sky Venture Capital, told Mashable Australia in an email she was pleased by the ASX's decision. "It may not be a great outcome for Guvera but more important than any individual company is that the credibility of the sector and the investors interested in it are protected," she said, pointing out the changes the company had to make to its original prospectus, including disclosing a further A$80 million loss in the 2016 financial year.

She suggested the result showed there are "decent checks and balances in play" for technology companies seeking to list, both through formal channels like the Australian Securities and Investments Commission and the ASX, and informal, including the media and tech community.

Nevertheless, Stead added the industry shouldn't focus on just high-profile candidates. "We need to ensure [checks and balances] are also playing out for those similar quality candidates that don't make as much noise because their valuations or capital raising are not as large," she said.

Craig Blair, managing partner at AirTree Ventures, also welcomed the ASX's move. "It's highly unlikely that investors have missed an opportunity to back a world class technology business and it's imperative that the ASX maintains its credibility rather than being the funder of last resort," he told Mashable Australia. 

"Every successful tech listing paves the way for other technology companies to raise money on the ASX. Sadly the opposite is also true."

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