ASIC told Whispir to disclose losses ahead of ASX listing

Documents released under freedom of information show ASIC questioned assumptions in the tech company’s 2019 prospectus.

Whispir CEO Jeromy Wells. Picture: David Geraghty

Melbourne-based tech hopeful Whispir was told by the corporate regulator ahead of its listing to tell investors that it had delivered a string of losses and would remain loss-making following its ASX debut.

Whispir – which delivers bulk text messages on behalf of companies and government, and has been one of the recent successes of market listings in the tech sector – had its earnings forecasts grilled by the corporate regulator ahead of its listing in mid-2019, just as the nation’s technology market started heating up, internal documents show.

Since its listing two years ago, shares in Whispir have rallied from $1.48 to close at $2.39 on Monday, giving it a $280m market capitalisation. But documents released under a freedom of information request note that an Australian Securities & Investments Commission staff member – whose name was redacted – questioned assumptions in the company’s earnings forecasts before it listed. All companies that list on the ASX submit their prospectus for review to ASIC.

The treatment to Whispir is in contrast to the criticism ASIC is facing for the oversight of the prospectus of bigger tech firm Nuix, which had its prospectus waived through by the regulator.

The Australian revealed in May that ASIC took just 12 days to wave through the Nuix prospectus for an IPO, despite repeated warnings from a high-level Nuix insider that the prospectus was riddled with dangers for investors. Following its listing in December, Nuix issued several profit downgrades, resulting in the loss of hundreds of millions of ­dollars in shareholder wealth. Nuix is now under investigation by ASIC for alleged misstatements in its prospectus.

ASIC chairman Joe Longo, speaking before the parliament, said the regulator’s role was to ­review corporate disclosure. “We may intervene if we believe a ­document makes material misleading statements or omits infor­mation that is required in order for an investor to make an informed investment decision,” Mr Longo said.

In its review of Whispir, ASIC asked the technology company to tell investors it was loss-making.

“We consider the chairman’s letter should disclose some comment on the company’s historical financial results, and that the company does not intend to make a profit in the foreseeable future,” ASIC said in its correspondence with the technology company.

ASIC’s letter to Whispir’s accountants HWL Ebsworth asked in reference to “comparisons for FY18 versus FY19, and FY19 versus FY20” for Whispir to “provide the mathematical basis for these assumptions and any calculations used to substantiate the projections”. ASIC said: “With reference to the FY19 and FY20 EBITDA graph provided in Figure 4.36, please explain when the company anticipates to make a profit.”

The changes were reflected in Whispir’s updated prospectus.

Whispir’s prospectus issued guidance for the 2019 financial year of $30.5m in revenue. It achieved this, delivering revenue of $31.15m. The prospectus also posted forecasts of $37.84m in 2020. Whispir cleared this, with $39.09m in revenue.

While the company has yet to turn a profit, it has since gained significant growth in business as a result of the Covid pandemic. In the year to the end of June, it posted a $4.7m earnings loss, on the back of a $7.2m loss a year earlier.

Whispir has since won a contract for Victoria’s contact-tracing efforts and its vaccine rollout, sending out personalised text messages. Whispir’s 2020 results note its 33 per cent growth in transactional revenue derived from sending messages.

Transactional revenue accounted for 64 per cent of the company’s full revenue. A breakdown of annualised recurring revenue for Whispir shows a significant growth from government and education clients between December 2019 and 2020.

Whispir told The Australian it “does not disclose specific revenue detail or transaction volumes for any customer”. A spokeswoman said: “Our customer base includes a range of disaggregated government bodies, both locally and internationally.”

In its latest forecast, Whispir said it expected between 20 per cent and 26 per cent year-on-year growth in revenue by the end of the financial year.

Wilsons analyst Ross Barrows said Whispir’s 2020 revenue breakdown showed no material difference between years and the company had been a beneficiary of “existing, secular trends as a ­result of the pandemic”. He said: “Whispir’s FY22 revenue guidance is based on its expectations of growth across its customers and its geographies.”

Foad Fadaghi, managing director of tech analyst Telsyte, said Whispir’s slightly better-than-­expected performance aligned with new business gained from the pandemic.

“Many technology companies have benefited from new government business, but some of this was offset by reductions elsewhere,” Mr Fadaghi said.

“Depending on the success of the pandemic communications systems, it is reasonable to assume government customers will continue to seek workflow automation in other constituent communications.”