Powerhouse Ventures sells out of Syft

Even though Syft's performance under chief executive Doug Hastie has pleased Powerhouse, it has been branded as "off-model."

ASX-listed tech incubator Powerhouse Ventures has sold its 1.5 percent stake in Syft Technologies after deciding the investment was too small to hold much sway with the Christchurch-based gas analysis firm.

Christchurch-based Powerhouse sold 929,000 shares for $996,900, having bought the stake for $99,000 in 2013, it said in a statement to the ASX. That was below a $1.3 million valuation the stake carried on Powerhouse's books after recent gains in Syft's share price, however it reflected a 76 percent annual internal rate of return on the investment in the company's first liquidity event.

"Post the Powerhouse IPO (initial public offering) which occurred in October last year, the board reviewed all Powerhouse portfolio holdings and categorised some investments as being 'off-model'," managing director Stephen Hampson said. "At this level of holding, Powerhouse is unable to apply significant influence to an investee's strategic direction and whilst we have been delighted with Syft's performance under CEO Doug Hastie's guidance, Powerhouse will instead reinvest the proceeds over time in new ventures."

The Christchurch-based technology incubator raised A$10.9 million in an initial public offering, short of the A$20 million it had been seeking, and its shares have steadily fallen from A$1.07 on its market debut on Oct. 12 to trade at 70 Australian cents. Powerhouse raised the funds to expand its investment portfolio, which now spans 23 early stage to mature businesses, and typically takes a long-term view on a holding.

Syft was spun out of research from Canterbury University to commercialise technology that makes chemical sniffer devices to test air quality. Last month it shifted trading in its stock to the Unlisted platform from Computershare's ShareMart system and signalled plans to raise funds to support rapid sales growth. The shares last traded at $1.45 on April 24, valuing the company at $93.6 million.

(BusinessDesk receives assistance from Callaghan Innovation to cover the commercialisation of innovation.)

(BusinessDesk)


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Syft has been a great turnaround lead by the CEO, and this has obviously been a very good investment by Powerhouse. But a few points to note:

(1) Sale price of $1.07 verses market value of $1.45 - shows how hard it is to exit evening small stakes in unlisted / early stage companies.

(2) Powerhouse was a passive investor with no input into the business - as far as I know, so does not validate their model in any form. But does show the value of having strong management.

(3) $1 million will help plug the cash gap in their business plan. Will be interesting to see if they can exit the other "non-core" businesses, and what discount they need to offer to get rid of stakes.

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Congratulations to Doug Hastie for extracting Syft away from Powerhouse

So that means Powerhouse had Syft overvalued $375,000 or 29%
I wonder how their other investments are faring - are they overvalued as well by 29% or more. If I was a Powerhouse shareholder I would be asking the company to clarify the current value of their investments and I am sure the ASX will be asking that question

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Especially given they have a number of companies that have been valued using Equity Crowd Funding raises - Balex Marine was valued at around $6m, six months ago and now is in liquidation. ECF valuations are over inflated and in my view should not be used as a proxy for valuing any portfolio asset in a VC / angel Fund. Valuations should only alter if true independent valuations have been determined by a significant third party investor.

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Balex is not a Powerhouse company but one backed by another NZ angel group - but illustrates in my view how flakey ECF valuations are - for the most part.

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Equity crowd funding is a recipe for disaster in my view...why the fma got excited about it I don't know...they have a lot more important things they could be doing to protect retail investors

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A win for everyone here.

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It would be interesting to see how some of the earlier investors have come out of this. My guess is many paid inflated valuations and were diluted when they could not flow on when some of the subsequent rounds were done at more realistic valuations. I think over $30m has gone into this business, my guess is even at a market capitalisation of around $60m many will not be in the money.

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That's likely correct - I suspect there are still people with losses, but at least they have lost less than before..

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Fair point but people have lost money. Looks like some people paid 50 times what powerhouse paid so looking at 20 cents in the dollar.

But without the new CEO they would have died

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Classic example of something is only worth what someone is willing to pay for it. NOT what your claim it to be worth

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Last sale is irrelevant guys..currently quoted 1.20/1.30 and the fact that volume has been done at $1 or so doesn't look good,outstanding prospects or not.

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They would be lucky to get $0.70 on a full trade sale. This is the issue and the problem only valuing companies on their last funding rounds. Its easy to get a good price for 5% of something. But its only really worth what a sale of 100% looks like

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Tea anyone?

The world is awash with such technology possible a rough time ahead for S(n)yft

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Assuming this was an off market transaction, I'm interested in who paid $1m to get into this company. Someones got a lot of confidence.

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Assuming it was one person. I could imagine that the larger Syft shareholders would not want this parcel being sold through the market as the share price would fall significantly in my view.

Maybe some existing powerhouse investors saw it as a way of propping up the business that one suspects is short of cash.

At the time a 40% discount to the last traded price - maybe someone thinks that the market price is relevant.

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