CBD

Investors ignore floating ghosts

As dot.com frenzy 2.0 reaches its peak, one important question emerges: which tech float will be this generation's pets.com?

Those who remember the first boom at the turn of the century - an era inhabited by SpongeBob Squarepants, the Y2K bug and a cigar-wielding Bill Clinton - will recall that pets.com was an online pet supply store boasting excellent marketing but an unfortunate habit of losing money every time a customer bought a bag of kitty litter.

Raising US$82.5 million when it listed on the Nasdaq in February 2000, it lasted just nine months before going broke, an event as inevitable as Winona Ryder getting arrested for shoplifting.

But just as Johnny Depp scrubbed Winona from his shoulder (he's now tattooed "Wino Forever"), so it appears today's investors have erased all knowledge of the first digital disaster. Not even the sad flop of the iSelect float has jogged market memories. How else to explain the eagerness of Australian investors to rush into dot.com Freelancer, which closed its IPO on Wednesday, a day early?

While Freelancer was after just $15 million, representing 6.9 per cent of the company, the float gives the company a market cap of a whopping $218 million.

That values the stakes of CEO Matt Barrie and co-founder Simon Clausen at $100 million and $84 million respectively.

As CBD discussed on July 31, the company makes its money clipping the ticket as it matches clients keen to pay as little as possible for services such as website creation and smartphone app design with underemployed workers who will gladly accept the miserable few dollars on offer.

While the prospectus boasts that freelancer.com has 9 million users, revenue in financial year 2012 was only $10.6 million - or just $1.17 a user (the prospectus doesn't draw any distinction between active users and those who haven't logged on for months).

After costs, profit was just $728,000 - and the company reckons financial year 2013 will be worse, at $471,000.

Furthermore, before the cash injection from the float, Freelancer's current liabilities outweighed its current assets by $5.2 million - not generally regarded as a good thing. Pleasingly, the company's main asset is an $11.5 million pile of cash, soon to be swelled by $12.8 million reaped from the float.

However, its only other major assets are $1.4 million worth of domain names and $6 million of goodwill.

And what does the company plan to do with the money it has raised? Er, something or other. It has earmarked $1.25 million to buy yet more domain names and the offer itself will cost about $1 million. The rest is to be used for working capital and "current organic growth opportunities".

Oh, and it also plans to lend $3 million - interest-free - to staff so they can buy shares.

On the upside for investors, if the company does start making serious money it has a handy tax haven-enriched corporate structure that should keep claims from the government at bay.

Freelancer Ltd is an Australian company, about to list on the Australian Securities Exchange, but in a Google-esque move, users pay their fees to a company in Switzerland (where Clausen lives).

If the experience of eBay is any guide, this means the Tax Office won't get any GST.

FKP retires name

And so, after close to 43 years, the former Forrester Kurts Ltd, latterly FKP Property, has disappeared, to be replaced by the blandly inoffensive moniker Aveo Group.

FKP was born in 1998 in the merger of Peter Kurts Properties, founded by the late Peter Kurts in 1964, with Forrester Parker Group, run by Rod Forrester and Phil Parker. Having begun by erecting offices and apartments from the Gold Coast to Brisbane, it is now focused on retirement homes.

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bbutler@fairfaxmedia.com.au