CV Check Ltd (ASX: CV1) has had a cracking start to its life as a public company. Less than four weeks ago the company listed on the ASX at $0.20 per share and the shares are now trading around $0.70 per share – a 250% increase!
Its incredible debut is possibly attributable to investors associating it with online employment businesses Reffind Ltd (ASX: RFN) and 1-Page Ltd (ASX: 1PG) which over the past year have skyrocketed 400% and 1,300%, respectively.
Similar to Reffind and 1-Page, CV Check is also unprofitable and burning cash quickly in its quest to expand. Surprisingly, the business was founded over 10 years ago, but every year it has made a pre-tax loss according to the data available in the IPO prospectus that is shown below (FY16 is a forecast).
According to the IPO prospectus, "the company operates an online global screening and verification (SAV) service through its website cvcheck.com. The company has developed an online interface that enables users to engage CV Check to access both primary and third party information data providers and data sources such as police databases, traffic records, and professional membership organisations."
A quick browse through the website shows a large suite of information services for corporations and individuals. Its key information checks include (1) police & traffic, (2) credit, financial & business, (3) employment information, (4) qualifications & memberships, and (5) tenancy checks.
CV Check is tiny with a market capitalisation of around $60 million and around $10 million of cash to spend following the IPO. The business will face stiff competition with large competitors such as $2.2 billion Veda Group Ltd (ASX: VED) already offering the same services in Australia and New Zealand.
The short-term gains made by companies such as CV Check, Reffind and 1-Page have been exceptional and investors buying these companies are hoping that one day they will be profitable. However, CV Check doesn't appear to have a unique or innovative approach like Reffind and 1-Page that will help it take market share from existing competitors. For this reason, I would wait and see how CV check performs in its first few years as a public company before buying into the hype.
