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Freelancer Ltd lifts 8% on latest acquisition: Is it a bargain?

Shares of freelancing and outsourcing marketplace, Freelancer Ltd (ASX: FLN), today soared at much as 8.5% before settling to trade 6% higher following the $430 million company’s decision to buy California-based e-commerce business, Escrow.com.

In an announcement to the ASX, Freelancer said it would acquire the secure online payment business for $US7.5 million in cash, with a $10 million institutional placement already being completed at a price of $0.995 per share – a discount to the last traded price of $1.

Escrow.com provides licensed and regulated online secure transactions between buyers and sellers by acting as a third party. Founded in 1999 by Fortune 500 company, Fidelity National Financial, Escrow.com is partnered with reputable names such as eBay, GoDaddy, Autotrader.com and Flippa.com.

During financial year 2014, Escrow.com had net revenue of $US5 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of $US1.2 million, with over $US2.2 billion in transactions performed to date.

However, this deal is also one of strategic importance to Freelancer.

Escrow.com will be able to reduce the financial risk involved when Freelancer matches customers with freelancers from around the globe.

Freelancer’s CEO and 44.7% shareholder, Matt Barrie, said: “We are pleased to acquire Escrow.com, the world’s largest online escrow company.”

“This highly complementary acquisition will enhance the ability of our 15 million users to transact securely, and there are large opportunities for growth and synergies with core offerings,” Mr Barrie said. “Finally, it is a strong cornerstone for entering the payments space.”

Should you buy Freelancer shares?

Based on total users and projects posted, Freelancer is the world’s largest freelancing and crowdsourcing marketplace. After a well publicised initial public offering in late 2013, shares of Freelancer have fallen from their peak of $1.69 to trade at around $1.05 today.

After its recent quarter was cash flow positive, it is arguable that now could prove to be the best buying opportunity for investors bullish on the company.

However, it is important to remember it is still a speculative company. While, there are tremendous opportunities for Freelancer to make its own online marketplace (similar to fellow ASX-listed technology company XERO FPO NZ (ASX: XRO)) it remains to be seen just how profitable it can become.

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Motley Fool contributor Owen Raskiewicz owns shares of Xero. Owen welcomes your feedback on Google plus (see below) or you can follow him on Twitter @ASXinvest.

The Motley Fool Australia owns shares of Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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