The history of recent ASX IPO’s is starting to look tattered – companies such as South32, Dick Smith, McAleese Corporation, Slater & Gordon, Surfstich and now the latest, Temple and Webster.
All are recent floatations (in the last three years to four months) which have gone badly for investors – Dick Smith in fact has come, floating in December 2013 at $2.20 a share, and going on to blow up more than half a billion of value at its peak, before going broke in December 2015 – early January of this year.
Slater and Gordon is also less recent float – listing in 2013, but its current share price is well under the $1 offer price after it blew up its accounts and $6.37 a share fund raising (more than $800 million) in 2015 to finance the stupid move into the UK market.
Surfstitch floated at the end of 2014 at $1 a share, the shares more than doubled that, then collapsed on the abandonment of earnings guidance and the shares are around $1.37. The low was 99 cents in late February. The shares are higher because of suggestions of privatisation offer from joint founder, Justin Cameron.
McAleese floated at $1.37 a share in 2013 – its shares are now suspended, it lost $97.4 million in the six months to December and it is looking at refinancing or possible privatisation and the shares really have no value, even though they last traded at 5.8 cents in late February.
South32 didn’t have a spin-off price for the BHP deal – it first traded at $2.13, rose higher than that, then fell to a low of 87 cents earlier this year in the great commodity sell-off and then saw its shares rebound after write-downs, restructurings and big losses convinced investors it was serious about cost cutting.
And then there’s the latest dud – the online furniture retailer Temple & Webster which this week revealed a board and management reshuffle in the wake of a recent profit warning that triggered a 70% plunge in the share price. The company, which floated on the ASX in December at $1.10 a share saw its dreams shattered by the weak profit report. A rotten December-half result and a full-year profit warning, saw the shares plummet from 63 cents (they were already well underwater) to as low as 18 cents. They ended on 27.5 cents yesterday, which means big losses for original shareholders.
The company revealed a loss of $7.5 million before interest, tax, depreciation and amortisation (EBITDA) for the December half and warned that its full-year EBITDA loss could blow out to as much as $14 million, compared with the prospectus forecast for an $8.5 million loss.
In attempt to boost its standing with investors, the company this week appointed former Fantastic Holdings CEO Stephen Heath (resigned from Fantastic in February after a dispute over bonuses) as a non-executive director and adviser to senior management. (In other words, someone with solid retailing experience.) Mr Heath ran vacuum cleaner chain Godfreys and leisure and sporting goods operator, Rebel Group before his Fantastic gig started in 2012. And the company said Arden Point principal Mark Coulter, one of the four co-founders of Temple & Webster, has been appointed chief operating officer and will take responsibility for day-to-day operations.
Chief financial officer Deborah Kelly has resigned after six months in the job and accepted a senior role with a former client. And CEO and co-founder Brian Shanahan will hold the finance fort until a new CFO can be found.
Temple & Webster expanded before the float by buying other online retailers, Milan Direct and ZIZO. That seems to have produced integration pressures and cost worries, so now cost cutting and retrenchment is the name of the game to right the group in the wake of the market thumbs down to the profit warning.
It is also attempting to boost sales growth by launching a permanent Temple & Webster online store to complement its time-limited offers, opening its first Milan Direct physical showroom, and targeting trade and professional customers as well as households.
It’s an old story for the online world – with the exception of giants like Amazon, most cannot do without some hard-nosed retailing experience from the bricks and mortar world – the very space these start-ups have tried to avoid.
For investors, it is another warning that not every float is a gold-plated money maker and that management, the business plan and the retail and corporate environments are important to success – not to mention the overall health of the economy.
