Despite its explosive debut Freelancer Ltd (ASX: FLN) has had trouble capitalising on its investor appeal, and shares in the company recently sank almost to their issue price of $0.50.
They have nearly doubled to $1.10 in recent weeks however after the acquisition of an Israeli online marketplace, and today's purchase of a similar company in Spain could propel the company even higher.
With the addition of two major overseas online marketplaces to its portfolio, Freelancer is expanding its content offering overseas in a big way, with Spanish one of the world's most spoken languages (after English, Mandarin and possibly Hindi).
Although this is exciting and the possibilities for cross-promotion (allowing companies expanding in overseas markets to hire local experts) are endless, I have to sound several warning notes.
Firstly, the acquisition of the assets of Israeli company DoNanza occurred after that company closed down in June last year. Clearly the online marketplace business wasn't as successful in Israel as investors might be hoping – maybe new management can turn it around, maybe not.
Secondly, investors are still waiting to see profits from Freelancer's ventures, with the company posting a full-year loss not long ago, despite rapidly growing revenue.
On the plus side however both acquisitions were funded from existing cash surplus, meaning no risky debt, and as Freelancer grows its ability to cherry-pick appealing companies overseas will increase.
The ability to directly link talented professionals with businesses is an innovative model and is sure to be lower cost than the traditional method of hiring consultants.
In this sense, Freelancer operates a revolutionary idea, which could well be successful as its network effect grows – just look at how well SEEK Limited (ASX: SEK) has entrenched itself into the modern job-scape.
However, I encourage investors to remain cautious. Freelancer is an operating company with income streams, and should be judged on its financial performance rather than more speculative 'what-if' scenarios.
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