The Australian Shareholders’ Association yesterday wrote an excellent note to their members warning them about the risks of investing in the upcoming float of music streaming business Guvera.
But they also, according to the AFR, took a swipe at ASIC and the ASX for allowing businesses like Guvera come to the market at all:
“It is really concerning that a loss-making company which expects operating losses and negative operating cash flow to continue into the future may list on the ASX, particularly where its ongoing viability is dependent on the proceeds from the IPO”
Personally, I think that’s asking way too much of the regulator. There are plenty of businesses come to the stock market in a loss-making position – often that’s why they need the money. Cloud accounting software business Xero (ASX:XRO) been losing an increasing amount of money every year since it listed on the ASX, yet I think our market is a lot better for having it listed here. How is ASIC to know whether Guvera is the next Xero or not?
Their job should be to make sure the disclosures are accurate and sufficient enough to allow an investor to make an informed decision. If those disclosures say the company hardly has any revenue, is going to lose a small fortune and will probably go bust if it doesn’t raise enough money, and investors are still stupid enough to invest their money, I say let them go for it.
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Forager Funds is a boutique fund manager specialising in a value investing approach. We offer an ASX listed Australian Shares Fund as well as an International Shares Fund both aimed at delivering returns for long term investors.