Are You Ready to IPO?

There was never any question high-value crop developer Abundant Produce was destined for an ASX-listing.

Its founder, Tony Crimmins, has been involved in 15 listings and he conceptualised Abundant Organics, which produces high-value greenhouse vegetable crops, with an initial public offer (IPO) in mind. 

"We drive our companies from the start and find businesses that have the modelling that fits a public company in the future," Crimmins explains.

Although it operates in the agriculture sector, Abundant is at its heart a technology company, which tend to experience immense growth rates. They require funding to expand, which often makes them suitable companies to list on stock markets. But it takes tremendous preparation to ready a company for a listing, as Cummins explains.

First the technology must prove itself, a stage at which investors generally take on considerable risk. When it becomes clear the business has a viable future, only then will it be at a point at which a listing can be considered.

"After about three and half years we realised that we had a global product that required a series of trials and tests. Our trials gave us confidence we had a commercial product, and at that point we were able to prepare the company for listing," says Crimmins.

Abundant Produce Founder, Tony Crimmins

Finding investors

Once its been proven the business has a great commercial future, the next step is to engage with investors. Technology companies have one common feature: they are complicated. This means it's important to be able to simplify the message for investors as much as possible.

"We were fortunate our broker understands agriculture, and that agricultural has become one of the darlings of the ASX, so we were able to attract investor support," Crimmins explains. Abundant raised $3 million for its April 2016 float. Its share price rose 150% on its debut on the bourse.

However, it can be challenging attracting investor interest for a small capital raising; institutional investors will rarely invest in such a small float because they are unable to take a meaningful position. So, as was the case with this float, interest from high net worth investors was sought. At this stage it's important to worth with a broking house that has access to the type of investors the business is seeking. Abundant chose Blackwood Capital, which has an understanding of technology and agricultural-based businesses.

Says Crimmins: "There are a lot of brokers that have access to investment firms or high net worth individuals. But to find somebody that actually understands the technology and how it fits into the commercial phase is hard to find."

Getting IPO-ready

As a business prepares for a listing it generally undertakes a transformation to ensure its corporate governance and operational structure matches investors' requirements. But in Abundant Produce's case, it has been structured for a listing from its inception.

"Because I have listed many businesses I know one of the most important things is that the accounts are exact and are up-to-date. So, our accounts as a private company were always exactly the same as a public company," says Crimmins.

"We were able to list with minimal expenses because everyone in the business understands the ASX's requirements, which reduced legal fees," he says.

One of Crimmins' tips for other businesses looking towards an IPO is to ensure the business needs money for expansion. "The type of business that is welcomed on the ASX is something that is relevant to the times. The ASX goes through phases: it will go through biotech, it will go through apps, it will go through agriculture and it will go back to mining. So you have to find out which part of the cycle you are in. Otherwise, there is total disinterest in what you have got even though it might be good. That is the most important thing."

He says the company must also have the ability to grow. "There are a lot of industries that make money. But ASX companies must be able to show an extreme amount of growth potential."

According to Crimmins, when running a publically listed company, remember you are investing other people's money. So it's important that costs be controlled.

Key Takeaways

• Have a commercially proven product before tapping the market for funds.
• Work with a broker that understands your industry.
• Never forget you're responsible for investing other people's money.