Friday, 15 November 2013

Freelancer: priced for perversion

Freelancer (FLN.AX) listed on the ASX today, after an IPO of less than 7% of the company, with 30m shares offered at $0.50. Directors hold 87% of the 436m shares outstanding, with the top 20 shareholders owning 96%. Of the $15m cash raised, $1.25m was paid to a director's company for "various domain names" and $1m was spent in offer costs. $2.5m was doled out in non-recourse loans for directors and employees to buy employee shares. FLN opened at $2.50, pricing the company at $1.1bn, for a forecast 2013 price earnings multiple of 2,300. After peaking at $2.60 in the obligatory initial ramp, FLN's "market" price then fell as much as 45% in intraday trading, before closing at a $1.60.
These facts would seem enough to deter any sane person from investing in FLN. But in today's bizarre world this market perversion is regarded not only as entirely normal, but as a very positive start to a great investment for long term buy-and-hold granny investors. The broker of the IPO was KTM Capital, who previously had managed capital raisings for poisoned chalices Datadot (DDT.AX) and Antaria (ANO.AX). The share prices of DDT and ANO naturally follow the by-now familiar pattern of long term shareholder value destruction interspersed with temporary ramps.

In the case of Datadot, KTM got a wrist-slap from the Takeovers Panel for a fraudulent scheme to benefit insiders, with its conduct declared unacceptable and misleading.

So do as the co-opted media tells you, don't dig too deeply researching or thinking, just throw caution to the wind and buy all these great shares that are being shilled.

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