Freelancer.com, the online job outsourcing company, will float on the ASX on November 15 and aims to raise a tiny $15 million, giving up only 6.9% of the company to the public. The remainder will stay with the three current directors, CEO Matt Barrie (46%), Director Simon Clausen (38.5%) and CTO Darren Williams (2.95%).
The listing, of 30 million shares at 50 cents each, will value the company at $218 million, far less than the reported $400 million that global recruitment company Recruit.com offered for Freelancer in September.
It will be one of only a few listed technology stocks on the ASX, and will be under significant pressure from day 1 to live up to the hype. Freelancer will float on a forward price-to-earnings ratio of 463 at the listing price. This is obviously a huge number when compared to the 12-15 P/E of the banks, and even the 70-odd P/E of listed Asian property website iProperty (ASX: IPP), however CEO Matt Barrie believes it’s justified. Mr Barrie compared his company with other rapidly growing companies such as LinkedIn, which currently trades at over 900 times, and recently listed accounting software provider Xero (ASX: XRO) which has yet to turn a profit but has tripled in price since listing.
Freelancer will be targeting aggressive revenue growth over profit growth in the next few years and doesn’t plan on paying a dividend any time soon. Mr Barrie noted the huge potential, saying that one company in the industry would one day be as big as Amazon (NASDAQ: AMZN) or Ebay (NASDAQ: EBAY), especially as the developing world slowly comes online. The prospectus references the US census bureau which believes that 60% of the world’s population is yet to use the internet. It’s these people that Freelancer hope will help rapidly grow its 9 million-user customer base in the years to come.
The float of freelancer.com follows a number of other high-profile floats this year, including the trouble-plagued iSelect (ASX: ISU) IPO, and the successful floats of 99wuxian (ASX: NNW) and OzForex (ASX: OFX). 99wuxian and OzForex are up 13.3% and 25% respectively, while iSelect has dropped around 20% so far.
IPOs on the ASX this year have received a mixed reception, however the standouts have performed exceptionally so far. Freelancer may be one of these that outperforms as the small amount of shares on offer will constrain the supply and push up prices if demand is strong. Additionally, the prospectus forecasts strong revenue growth and a desire to push into developing countries in the near future. Like any IPO, investors should carefully consider the outlook for the company and how likely it is to hit its forecasts, investors in iSelect have seen recently how quickly shares can be sold off on bad news from an IPO.
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Motley Fool contributor Andrew Mudie does not own shares in any of the companies mentioned.