Clutch of ‘nefarious listings’ shouldn’t put markets off tech stocks

Airtree Ventures chief Craig Blair sees the local sharemarket as a ­viable place for burgeoning technology companies to end up on.

Airtree managing partner Craig Blair. Picture: Hollie Adams.

Airtree Ventures chief Craig Blair sees the local sharemarket as a ­viable place for burgeoning technology companies to end up on, despite the sector being blackened by a string of disappointing listings by offshore-based companies.

At the Morgan Stanley Australia Summit yesterday, Mr Blair said a clutch of “nefarious listings” had given the technology industry a tarnished reputation on the ASX. “It is in all our interests to find a path for great companies to list on the ASX,” he said.

Mr Blair said that part of the conundrum in Australia was a limited understanding by public market investors of revenue multiples used to assess technology companies that were often not yet profitable.

While he declined to name specific companies, Mr Blair said questions had to be asked about technology companies listing on the local bourse without any links to Australia. Looking at share price performance, companies that had not traded well on the ASX included US-based fintech Change Financial and employee engagement firm REFFIND. The hype surrounding ASX-listed 1-Page, a one-time market darling, unravelled several years ago and led to the company’s demise.

There are, however, a host of technology groups that have prospered after listing, including Appen and software group Xero.

Morgan Stanley’s Brendan Lee, who runs telecommunications, media and technology ­investment banking, said the ASX had started “to blossom” as a destination for technology companies, with at least a dozen now at scale.

Mr Blair told the conference the ASX was a viable option for venture capital firms to exit their portfolio investments, although performance after listing was key.

“The important thing is that these companies trade well post listing,” he said. “The sad truth is many of the great ones leap straight to the Nasdaq.”

After an aborted attempt last year, venture capital-backed ­lender Prospa is due to list on the ASX next week.

Earlier at the Morgan Stanley conference, Atlassian co-founder Mike Cannon-Brookes noted that Australia’s technology industry did “bat above” its weight but he ­lamented the federal government’s cuts in research and development tax incentives in the past two federal budgets.

He described the government’s approach as “punching us (technology industry) in the eye”. He sees Nasdaq-listed Atlassian’s biggest opportunity as the more from supplying services and workplace tools to technology workers to targeting a broader segment of more than 800 million “knowledge workers” relying on collaboration.

The ASX has been on a drive to attract more listings by companies based outside Australia. Over the past five years 126 offshore-based companies have floated on the ASX.

Blackbird partner Niki Scevak said yesterday there was often ­tension between valuations on public and private investment markets, which at times led to ­“almost a ­hatred” of private investments. But he pointed out that companies such as Google and Facebook had built deep engagement with their user base that took time to monetise.

The mega floats globally of firms such as Pinterest and ride-sharing groups Uber and Lyft have sharpened the debate on valuations after mixed trading results.

Morpheus Ventures managing partner Joseph Miller said his firm weighed up factors such as the size of the opportunity, the strength of a team and looked for technology that was hard to replicate.

He drew parallels between the US and Australian markets for venture capital investment and the regulatory and legal framework. “It is a competitive advantage that Australia has, and I think you should look to expand on that,” he said.