Raiz Invest (previously Acorns Australia) has seen its share price slump almost 50% less than four weeks after listing on the Australian Stock Exchange.
Unfortunately for investors in the company there has been little to celebrate since their IPO on 21 June, with the company ending it’s first day of trade at $1.50, almost 16% less than the price investors had paid ($1.80) in the IPO.
Since then the company’s share price has continued to trend lower with only a handful of days offering a brief pause to the decline. On Monday, Raiz Invest closed below $1 for the first time since listing, hitting a low of 93.5 cents before closing at 97 cents per share.
No doubt many investors will be scratching their head as to why this popular fintech company has been hammered by the market. In an update to the market on Monday, Raiz Invest outlined that they have successfully completed the beta test of the Raiz Invest Super Product, which is scheduled to launch on 16 July 2018.
The company also pointed out that they have had more than 500,000 customers sign up for an account and amongst their user base more than 80% of users have made an investment in the past four weeks.
Despite these promising top line numbers Tristan Cole, founder of Sempo, pointed to a number of potential red flags in a Medium post prior to the company’s IPO. In particular Tristan highlighted the following issues as being potential concerns for investors:
- The CEO and Founder are being paid over $500,000 per annum, which is a large salary given the size of the company.
- The CEO and Founder were paid a $1 million cash bonus at IPO. Given the total capital raise was $15m list represents ~7% of the funds.
- The platform was built in the US and brought to Australia, as a result there may be questions over the company’s ability to continue product development at the same pace.
- Even though the name has changed from Acorns to Raiz there was no change to intangibles/goodwill value.
- There are competitors in the space, including the new Spaceship Voyager product.
- The company quoted $4,000,000 being budgeted for their AFSL, which seems high.
Potentially some, or all, of these issues are weighing on investors mind. Alternatively, it could be a case of early investors and employees taking the opportunity to take money off the table now that they have access to a liquid asset.
Regardless of the reason behind the fall the company will no doubt be looking to the release of the superannuation product for some much needed good news and hope that it can pull the company’s share price out of the steep decline it finds itself in.