Snakk Media share offer near bottom of valuation range

Derek Handley on the day of the March 6 listing

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Snakk Media, the latest brainchild of Hyperfactory co-founder Derek Handley, wants to raise up to $2 million through a share purchase plan near the bottom of an independent adviser report's valuation range.

The Auckland-based company will sell shares at 12 cents apiece, a 20 percent discount to the average trading price over the past 30 days and near the lower end of the 10.9 cents to 20.6 cents range attributed to the stock by London-based Edison Investment Research.

The research house had difficulty valuing Snakk because of the early stage of its existence and says removing a 25 percent bid premium would put the top end of the range at 15.5 cents.

"The company is at an early stage of its development and valuation is highly subjective," the report says. "In our view, these methodologies fail to reflect management's ambitions to realise the group's underlying potential."

It highlights the difficulties analysts have in valuing technology-based companies, a month after cloud-based accounting software firm Xero passed the billion-dollar value by market capitalisation before it even turned a profit.

The Snakk offer will be available to shareholders registered by before the close of business on May 1, and will be open from May 6-21.

Snakk plans to use to the funds to expand into new regions, grow its sales team, add new technology and look at strategic investment opportunities, it says in a statement.

The shares listed on the NZX at 6.5 cents last month in a compliance listing, meaning no funds were raised, and have since climbed to 15 cents.

Snakk's third-quarter sales accelerated to $1.44 million in the final three months of 2012 from $686,000 a year earlier, exceeding the $1.22 million it made in the first six months of the financial year.

The company makes money by aggregating publishers' ad space on mobile devices and matching it to advertisers' demand.


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4 Comments & Questions

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This guy Handley is certainly good at getting into the NZ "business" news media - it seems every week one paper or another has a story on this guy or his new company.

I guess because Handley is an ad man, the NZ media club love to drop Handley's PR spin in to their content. I cannot think of another tiny company with only $2 million in revenue that gets media coverage.

Yes, Handley wants to raise equity through an IPO, which may or may not kite the market cap of this penny dreadful. So what?

On the other hand, maybe I could use the Handley strategy to exit my tiny business. Nah - leveraging PR to unsuspecting "investors" is never a good idea.

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Not sure how the fund raising will go. Maybe an option should have been stapled to each new share at a reasonable exercise price and listed on nzx.

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Considering he sold out of his previous business in a reasonably large exit, one has to wonder whether he could stump up the money himself if he believed enough in his business?

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First rule of business.... Never use your own money if you can borrow off somebody else.

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