Hey Kogan, where’s retail investors’ access to your IPO?

Online retailer Kogan is planning to list on the ASX, but it’s unlikely that retail investors will be able to participate – even if they want to.

You see, like many companies, investment banks and brokers helping the company to list on the ASX will be doled out shares to sell to their favoured clients, while retail investors will almost certainly be ignored.

There is the new OnMarket Bookbuilds option, which is much more transparent and allows all investors access to an IPO (no matter who they have a brokerage account with).

And with the reported strong demand from investors – The Australian reports that the offer was four times oversubscribed – Kogan could have received more funds or a higher price for its shares, and likely paid less in fees if it had used the OnMarket BookBuilds option.

Kogan is reported to have offered $50 million worth of shares at $1.80 each to investors, valuing the company at $140 million enterprise value. That would also represent 20x forecast earnings before interest, tax, depreciation and amortisation (EBITDA) for the 2017 financial year (FY17). Kogan forecasting EBITDA of $7 million in FY17.

Kogan has around $200 million of sales purely online, has 2.3 million active subscribers and sells 28,000 products. The company’s nearest competitors  are most likely Grays Ecommerce Group Ltd (ASX: GEG) and eBay, but Kogan also competes against the likes of JB Hi-Fi Limited (ASX: JBH), Harvey Norman Holdings Ltd (ASX: HVN) and the presumably soon-to-be-listed The Good Guys.

Grays offers online consumer auctions in key categories of wine, consumer electronics, IT, appliances, home furnishings and jewellery. The company also had a number of retail websites such as, and – but these were sold to MySale Group plc late last year.

Foolish takeaway

Having revolutionised retailing in Australia, Kogan could have offered investors a revolutionary way to invest in the company, but alas it appears that is now unlikely.

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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.

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