ASX seeks more tech listings; Corporate governance is why the ASX has so many zombie tech companies

ASX seeks more tech listings

PUBLISHED: 5 HOURS 7 MINUTES AGO | UPDATE: 4 HOURS 53 MINUTES AGO

When Freelancer.com founder Matt Barrie spurned deep-pocketed suitors in favour of an Australian Securities Exchange listing for his online job outsourcing business, ASX chief Elmer Funke Kupper was one of the first to congratulate him. Mr Funke Kupper understands the need for ASX to attract more technology listings, says Mr Barrie. But Mr Barrie’s decision surprised many in the market, particularly because Australian investors have traditionally shunned capital raisings for young technology or biotechnology companies. For a long time, the view has been that the risks associated with investing in these types of businesses are too great. In turn, the companies themselves have felt that investors here simply do not understand their businesses.The ASX, says deputy chief Peter Hiom, is working hard to change that perception. But it is a slow burn.

“It’s going to take time,” Mr Hiom told The Australian Financial Review. “There’s no doubt there’s more for us to do even though we have some green shoots in our technology sector.”

In addition to Freelancer.com’s anticipated listing, Mr Hiom says there are three or four technology startup companies ready to list.

He points to Auckland-based accounting software maker Xero as one success of a local listing. The $1.8 billion company has seen share prices more than triple since it listed on the ASX a year ago and chief executive Rod Drury is positive on the experience.

The ASX now has 128 technology and telecommunications companies with a combined value of $87.4 billion on the ASX – though the vast majority of the sector is weighted towards Telstra’s $60 billion listing.

The ASX has been leading a push to educate investors about opportunities in the technology sector, holding round tables with institutional investors and increasing its equity research fund to $2 million to entice more broker coverage of small and mid-cap companies.

“We recognise there’s an educational effort in order to bring the investment community with us and understanding what opportunities there are,” Mr Hiom says. “These are relatively bespoke opportunities that need focus and effort.”

SEEK co-founder Paul Bassat, who now invests in technology start-ups through Square Peg Capital, says that although US institutions have deep connections with the technology sector, there has been a concerted effort among local investors to better understand the market since his job classifieds site listed eight years ago.

“I think the knowledge today is significantly different to what it was back then,” he says.

“You could probably make the argument that in some cases Australian companies do very well here because there aren’t as many listed tech companies on the ASX. Investors here aren’t spoilt for choice in the same way US institutions are.”

One factor potentially playing against local listings, Mr Bassat says, is an increasing search by Australian start-ups for US venture capital funding, a move that is likely to influence a company’s decision on where to list.

“One thing that might need to change is conversations with those shareholders rather than with ­management,” he says.

But Mr Hiom argues there is no reason why an Australian technology company, particularly those with valuations of up to $500 million, should choose the Nasdaq in the United States over the ASX.

“The listing rules have the right settings and allow us to be globally competitive, and that’s why we’re neither complacent, nor are we pessimistic,” he says.

Notes from The Valley: Corporate governance is why the ASX has so many zombie tech companies

Published 07 October 2013 10:32, Updated 08 October 2013 13:24

Chris Behrenbruch

Chris Behrenbruch says we have some sterling success stories, but the ASX is littered with zombie companies that are not performers. Photo:

The ASX is littered with underwhelming technology companies that are woefully undercapitalised, have little understanding of how to bring their products to market and have weak boards. Poor governance is the fundamental reason why we have so many zombie companies, writes Chris Behrenbruch.