After a delay caused by the Covid outbreak, Aroa Biosurgery's stockmarket listing is back on.
The Auckland-based medical technology company plans a float on the Australian Stock Exchange that would value it at A$225 million ($229m) - down on the A$300m tipped before the Pandemic.
In a bookbuild starting on Friday, it will seek to raise A$45m at 75c per share, with Wilsons and Bell Potter as brokers, according to an AFR report. Aroa CEO Brian Ward would not comment on valuation or timing but confirmed a tilt at the ASX was on the cards.
If it hits its marks the float would value Aroa at 8.4x forecast revenue - below the 19.0x of one of its medtech peers, the Wellington-based, ASX-listed breast screening software company Volpara, which has a market cap of A$324m.
Volpara has yet to hit profit. Earlier, Ward told the Herald that his company made a maiden profit "in the single-digit millions" on revenue that increased 118 per cent to $24.2m last year.
At the start of March, Ward said that an Australasian non-deal roadshow to raise awareness of the company among institutional investors was well received, but also that with the Covid-19 outbreak roiling markets, the timing of a potential listing is unclear and the company was keeping its options open.
At that point, after a decade concentrating on the US, Auckland-based Aroa was close to releasing its wound-care product on the local market for the first time.
The med-tech uses stomach lining from sheep to create a "bio-scaffold" that helps soft-tissue repair in humans for everything from bad cuts to hernias and breast reconstruction.
Although nearly all of Aroa's sales are in North America at this point - where it has had a complicated series of R&D and marketing partnerships - nearly all of its 150 staff are located at a 1700sqm facility beside Auckland Airport (see more on its operations and commercial structure in the Herald's recent profile here).
Ward said his company chose the ASX over the NZX because investors in the Australian exchange had more stomach for medtech startups - though he added that, operationally, Aroa is committed to basing itself in NZ long-term.
Just before Christmas, Aroa made another step towards its major capital raise by appointing Australian John Diddams to its board.
Diddams is also a director of Volpara, and Aroa chairman Jim Mclean was not shy of talking up the Australian's experience in managing secondary capital raisings and IPOs.
"Aroa continues to grow strongly and is considering its options for a possible IPO and capital raising in 2020, as it looks to grow to the next level of scale, consolidate its footprint in the US, broaden into other markets and introduce new products," Mclean said as Diddams' appointment was announced.
Fonterra's painful China exit
Fonterra is stepping up efforts to sell down its stake in China's Beingmate, having reduced its shareholding to 11.82 per cent from 18.82 per cent in the space of a year.
The Kiwi co-operative is now in the process of selling a further 30.7 million Beingmate shares in a block trade accounting for 3 per cent of the Chinese manufacturing company.
Beingmate shares recently traded at 5.95 yuan.
Fonterra sold an initial chunk of shares at an average price of 5.58 yuan per share, according to Shenzen Stock Exchange data.
• Fonterra to sell Beingmate shares at huge loss
Fonterra paid 18 yuan per share for its Beingmate shares for a total outlay of NZ$755m as part of a joint venture partnership that ended in disaster.
It had to write down the carrying value to $204m after a string of heavy losses decimated Beingmate's market value.
Fonterra made the decision to exit the investment on review of its overseas businesses since reporting a historic first annual loss of $196m and debt of $6.2 billion in 2018.
Under Shenzhen Stock Exchange rules it is only possible to sell up to 1 per cent every 90 days directly on the exchange, or sell up to 2 per cent in a single block every 90 days.
However, trades greater than 5 per cent can be made to an individual party in an off-market transaction.
Following heavy losses, Beingmate underwent a restructure, selling assets and reappointing founder Xie Hong (also known as Sam Xie) as chairman.
In late April, Beingmate released its 2019 financial report showing an annual loss of 103m yuan.
Abano back in play
UPDATED: Abano Healthcare has confirmed BGH Capital and the Ontario Teachers' Pension Plan have made two new takeover bids at $3 and $3.25 per share.
The dental clinic operator said any offer needs to reflect the firm's underlying value and provide shareholders certainty, noting that the bidders had backed out of an earlier deal at $5.70 per share in March when the covid-19 pandemic's impact on financial markets was in full swing.
Abano's board is considering other options, including a capital raising of between $50m-$70m.
This follows media speculation talks were back on with BGH Capital and Ontario after the initial takeover scheme was scuttled by the Covid-19 virus.
The news comes as Abano shares seesaw in volatile trading. The stock closed 10 per cent lower on Monday at $3.42, came back 5 per cent Tuesday morning before dipping again in afternoon trading.
In a market update last week Abano said it was considering a "range of transaction possibilities involving third parties" but also noted it is committed to addressing balance sheet concerns in the current calendar year which "are not limited to raising capital".
Abano's share price has been one of the more volatile of late – reaching a low of $1.17 on April 3.
BGH's previous takeover offer for Abano, via a Scheme of Arrangement with the Ontario Teachers' Pension Plan Board, was pitched at $5.70 a share, or $148.8m.
Independent valuer KordaMentha had valued the shares between $5.29 and $5.92.
Abano said last week it had extended its banking facilities, reflecting its "commitment to consider the transaction possibilities currently under review and to address capital structure.
"The facilities include pricing and facility review events which will be assessed by Abano's bank by reference to the company's progress against the option Abano elects to pursue. Abano's banking partner remains supportive of the company and the process it is following."
Abano currently has net debt of about $130m and total bank facilities of $163m, $49m and A$112m.
Hertz share issue: demolition derby
It is not every day that a federal judge acknowledges the laws of corporate finance, along with common sense, have turned upside down. On Friday, a US bankruptcy court approved a plan allowing bankrupt car hire firm Hertz to sell stockpiled shares. On Monday, the company put out a prospectus detailing an unprecedented plan to sell up to US$500m worth of equity. Its current market worth, after a surge of buying, is a little over US$400m.
Hertz, in a warning of more than 4000 words, pointed out the stock may prove "worthless". To avoid that, the reorganised company must quickly regain the scale it had before the coronavirus pandemic. The proposition is a fantastical one.
Remarkably, the judge acknowledged that selling equity was Hertz's best play because, as the company argued, equity was costless. A senior bankruptcy loan would carry a big interest rate and numerous liens and covenants.
Theoretically, equity capital can never be cheaper than debt. In the real world, that rule is violated all the time, usually to the detriment of shareholders.
The academic capital asset pricing model works out the cost of equity by adding a risk premium to a safe rate of return. The cruder empirical measure of the cost of equity is the reciprocal of the price-to-earnings ratio: the earnings yield.
The higher the stock price relative to earnings, the lower the earnings yield and the cost of equity. By this metric, dotcom high flyers or Tesla today, could issue shares for pretty well nothing. Their earnings might be years away, if they ever materialise at all. But the market faith in them would already be deep.
In the case of Hertz, the company concedes something far more extraordinary: shares in the market today are unlikely to exist in the future because junior creditors will probably take ownership.
Payback from Hertz's new shares is not really even a long shot. "Impossibility" is the word that springs to mind. Hertz would appear to be shrugging and preparing to take advantage of the greater fools. It can hardly be accused of underplaying the risks.
- Lex, Financial Times