Australian music streaming service Guvera is planning to list on the ASX, valuing the company at $1.3 billion if it goes according to plan.

But the service, which has been compared to Spotify and Pandora, made just 1.2 million in revenues in the 2015 financial year and posted a net loss of $81.1 million. In the first nine months of the 2016 financial year, the company has reportedly racked up losses of $80 million already.

The number of music-streaming users varies widely for every service depending on how they are classified and who’s reporting them. Getting an accurate number is complicated.

Spotify has an estimated 30 million paying subscribers worldwide at the end of March 2016 and 75 million total users. Pandora had 4 million paying subscribers and around 80 million active monthly users according to techcrunch.com in October 2015. iHeartRadio is a similar service offering free access to thousands of live radio stations and has more than 80 million registered users.

In the music streaming business, the most popular revenue model is where users listening free also get ads pushed at them, while paying subscribers get ad-free listening.

It’s a hotly contested sector with Apple Music entering in 2015 and rapidly growing users to rival Pandora and Spotify.

Guvera has an estimated 14 million registered users – down from 15.9 million the company reported in February 2016. Guvera’s model is to broadcast ads to listeners, with advertisers effectively paying for the music.

But the service has been widely criticised, including by Mike Cannon-Brookes, founder of Australia’s most famous tech company Atlassian. Mr Cannon-Brookes criticised the IPO on twitter.

Mr Cannon-Brookes thinks Guvera has less than 1 million monthly active users (or MAU) – well below the level the company claims, and also queried the dodgy loans – referring to an investment in Kwickie International – with one of Kwickie’s directors happening to be Guvera’s chairman Darren Herft.

Guvera has also been criticised for paying $22.5 million in fees to fundraising company AMMA private equity. Darren Herft also happens to be AMMA’s chairman.

Then there are the legal problems, with float proceeds reportedly used to settle debts due.

And the table of competitors in the prospectus is frankly incomplete and ignores some of the giants Guvera is going to have to compete with including Google Play, Apple Music, Amazon Music, Rhapsody, Groove, Tidal, JB Hi-Fi Limited’s (ASX: JBH) Now, MySpace and Soundcloud to mention just a few.

As we wrote last week, there are several tech wrecks on the ASX already, and retail investors are being sucked in by the ‘potential’ of these companies when more than a few are likely to drop off the radar with the next few years.

Foolish takeaway

If there’s a grain of truth to the media reports, then there are simply far too many unquantifiable risks for retail investors to go anywhere near Guvera. Buyer beware.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. 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.