Ten things you need to know about the Guvera IPO

Ten things you need to know about the Guvera IPO

While it’s usually a safe bet to assume investors will avoid a business model that they neither like nor fully understand, in the case of music streaming app company Guvera (that I’ll bet none of you or anyone you know has installed on their phone), there’s a twist that warrants increased awareness.

A string of accounting firms associated with Gold-Coast-based ‘AMMA Private Equity’ were paid commissions between 5%-10% to raise money from clients in order to fund “…mobile, internet and digital media investment opportunities,” according to AMMA’s website.

This all might sound quite exciting in an age where many tech firms have listed with multibillion valuations; however, almost all of the funds raised by AMMA Private Equity via their network of ambitious accountants were ploughed into the Guvera start-up.

While I would love to see this network of accountants’ clients repaid for their blind faith, I’m not so sure that the Guvera IPO that has been lodged with ASIC and the ASX will go ahead. Here are some of the reasons behind my scepticism - I’ll purposely keep it to 10 points to make good on the title of this article, but I could go on.

  1. Guvera boasts of having raised A$180 million and provides an indicative valuation of A$1.394 billion after listing, having enjoyed total sales revenue of $400,000 for FY2014 and $1.2m in FY2015, and losses of $29.7m and $80.7m for those years, respectively.
  2. Guvera co-founder Darren Herft is successful guy. But given Guvera’s biggest commercial success has been in the money it has raised versus the huge losses it has accrued, it is fitting that Darren co-founded AMMA Private Equity (owned 50% by his Herft Accounting Australia Number 2 Pty Ltd business), which has been paid a total of $22,485,168 in fees associated with raising money for Guveraincluding a seminar in Dubai as featured by one of AMMA’s influential accounting firms – click here for more.
  3. Now that the IPO has come along, AMMA Private Equity has terminated its commission deal, for which Guvera is now liable for a $500,000 termination fee plus any outstanding commissions or trailing fees. A new contract will be entered into that will allow AMMA to bill Guvera for promotion and marketing costs estimated to be $450,000-$600,000, plus around 5.75% of any further money raised.
  4. In a demonstration of Guvera’s ability to return value to its shareholders, it purchased a company called Blinkbox for $2.3 million in January, 2015, which was renamed Guvera UK. By July 2015, it was declared insolvent and went into administration. But it doesn’t end there: 80 former Blinkbox employees are suing Guvera for GBP10 million in redundancy claims, and former Guvera UK exec Michael De Vere is suing Guvera for A$6.9 million in damages.
  5. Another Guvera co-founder and friend has been paid $15,000 per month over the last 12 months to “project manage” the abovementioned legal work, but he’s going to cut that rate to just $6,000 per month now that Guvera is listing. His name is Brad Christiansen and his fees will go to the Christiansen Family Trust. You can read all about Brad’s legal expertise here: http://www.guveralimited.com/brad-christiansen/

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