Trending: Tech companies listing on the ASX - insights and benefits

21 June 2017

Sebastian Stevens , National Leader, Private Equity
Partner, Corporate Finance

Last year saw the highest annual number of tech companies list on the ASX since the dotcom boom of 1999/2000. This included 27 initial public offerings (IPOs), which raised a total of $650 million, while there were an additional 30 backdoor tech listings. So, what's causing the Australian tech explosion? Here's a look through the developments in the market, and how BDO is involved every step of the way.

Why tech?

The Australian tech sector has been growing since 2013, and the recent boom can be put down largely to the ASX's attractiveness as a place to list. The ASX is a very well-regulated stock exchange, and therefore has credibility. It's also a slightly less onerous process and less costly to list on than other comparable exchanges. 

Many US companies have found that the ASX represents a very sound alternative to a further round of venture capital funding.

With the benefits of a credible exchange, local investor support, attractive valuations and liquidity the ASX is luring US and other countries Tech companies.

As a result, Australia is becoming an incubator for tech companies who want to grow, get some critical mass and then - if they are successful – have the ability to move back to the US or other larger exchanges.

Updater Inc., a new SAAS service that assists Americans with the intricacies of moving house is an excellent example of this trend. Even though the service is entirely based in the US, Updater Inc. is listed on the ASX and the market here has shown great enthusiasm for it.

It's not just the US market that's listing on the ASX. BDO Partner Adam Myers recently spent time in Israel, talking to businesses based there which have seen Australia's attractiveness as a place to list. The majority of these are ultimately aiming for Nasdaq, but - like the American companies mentioned above - they see Australia as an easier route to this than applying for another round of venture capital funding.

Who's investing?

The growth of cross-border listings is also a factor in the ASX's attraction for investors, who have the benefits of being exposed to much larger global markets, while still investing in Australian shares.

Tech stocks in particular are becoming popular because they have the ability (if successful) to produce rapid share price growth, and therefore good returns. This is the case not only for larger Tech corporations like Apple and Facebook but also much smaller entities, such as Updater Inc. referred to above.

The retail market is attracted to these new tech listings, even early stage Tech companies. This is positive, but it does mean that if some of these new companies do fail, the retail market may lose confidence in these types of investments. This could then create a snowball effect that could mean other potential new listings of early stage businesses may not be able to raise capital.

The recent ASX tightening of the Listing Rules is specifically to deal with this kind of risk. BDO has been actively involved in ensuring a robust IPO process and is the leading Reporting Accountant advisor to IPO’s in Australia and has been for the past 15 years.

The TechKnow Invest Roadshow

The venture capital market in Australia is not as developed as it is in the US. This has led to an alternative funding market springing up in Australia, known as the high net worth family office market. These high net worth individuals are looking to invest in companies directly, and this is why we decided to sponsor the TechKnow Invest Roadshow.

This was a chance to give some exposure to new Tech companies, which have fantastic products and services, but are struggling to get local investors. The conference was attended by a number of high net worth individual groups looking to sponsor new tech businesses. We had a number of clients at the roadshow, including Updater, showcasing our focus on this part of the market.

What is BDO's role in tech finance?

Put simply, BDO has a solution or service for pretty much every stage of a tech company's growth and development. This includes at the earlier phase, services such as research and development grants, capital raising and effective tax and IP structuring, right through to maturity when they're looking to IPO and trade sale or merge.

Even at a business' starting point, when they want to fund their early stages, our research and developments team is one of the best in the country, and we can show a business how to get money back from the tax office to fund initial growth. We also have connections around the globe with venture capital firms and private high net worth individuals, who can help take a business to the next level. The TechKnow roadshow is an excellent example of this.

BDO has been involved in Tech for years, and our broad expertise working with a range of small and large clients means we can help anyone at any stage of their growth. We provide market intelligence, strategy to optimise innovation in product design, effective supply chain management solutions, and help navigate the complex financial reporting requirements. Please contact us for more information.