Unhealthy start for iSelect
While the broader sharemarket shed 1.5 per cent, iSelect shares slumped 29¢ at $1.56 on debut.
The Melbourne-based company had tried to list several times but weak market conditions forced it to continue to raise funds privately before it tested the water with a sharemarket listing. It recently raised $215 million at $1.85 a share.
The bulk of iSelect's revenues come from health insurance sales, for which it receives upfront and trail fees from insurers. It also compares and sells other products, such as life and car insurance, electricity and home loans.
But the ease with which competitors can emerge has kept potential buyers on the back foot, especially with some original backers exiting the stock as part of the initial public offering.
Concerns have also been raised about the company booking as profit money that will be collected later.
Among top shareholders, founder Damien Waller has a 12 per cent stake. Based on the $1.85 issue price, Mr Waller is down about $12 million on his holding, although he would have invested at significantly lower prices.
Others include US private equity fund Spectrum with a 7.6 per cent stake, and Melbourne venture capital fund Starfish Ventures with more than 2 per cent.
In a note by broker Select Equities this month, analysts Danny Goldberg and Phuong Huynh said: "We don't think this is a cheap offer price [$1.85]", but they added that the underlying growth and positive investor sentiment for online business models was likely to provide significant investor appetite and potential upside.
Frequently Asked Questions about this Article…
iSelect had a weak market debut, closing down about 15.7% overall. On listing the shares fell 29¢ to $1.56, while the broader sharemarket was down about 1.5% that day.
iSelect raised about $215 million in its IPO at an issue price of $1.85 per share.
Most of iSelect's revenue comes from health insurance sales, where it earns upfront and trail fees from insurers. The company also compares and sells other products including life and car insurance, electricity and home loans.
Analysts and market observers flagged that competitors can emerge easily in the online comparison space, which can deter buyers. There are also concerns about iSelect booking as profit money that will be collected later — a revenue recognition issue noted in the article.
Founder Damien Waller holds about a 12% stake; based on the $1.85 issue price he was roughly $12 million down on that holding (though he invested at lower prices). Other named shareholders include US private equity fund Spectrum with about 7.6% and Melbourne venture fund Starfish Ventures with more than 2%.
Broker Select Equities (analysts Danny Goldberg and Phuong Huynh) said they didn't think the $1.85 offer price was cheap, but they added that the underlying growth and positive investor sentiment for online business models could create investor appetite and potential upside.
While the broader sharemarket fell about 1.5% that day, iSelect's shares slumped much more sharply — down about 15.7% and off 29¢ to $1.56 on debut.
Consider the core business model (reliance on health-insurance upfront and trail fees), competition risk in online comparison services, the flagged revenue-recognition concern, insider and investor holdings, and the IPO pricing relative to broker views. Those factors — all mentioned in the article — can help you assess whether the stock fits your risk tolerance and investment goals.
Call 1300 880 160
Start a chat
Schedule a call
