Aconex IPO reportedly downsized but back on track for a December 2014 ASX listing.
Just a couple of weeks after postponing a planned Au$230m initial public offering (IPO) just 24 hours before it was due to publish its prospectus, Melbourne-based Software-as-a-Software construction collaboration technology vendor Aconex is (according to a report by Sally Rose in The Age; see also The Australian) to be back on track to float after a revised IPO secured $140 million from cornerstone investors. (17 November Update: Read also Aconex’s news release).
Joint lead managers Macquarie and UBS have now completed the institutional book-build for the re-engineered Aconex IPO, raising $140 million at $1.90 per share. Macquarie head of equity capital markets origination Mark Warburton explained:
“We had covered the book for a $230 million raising, but then the market came off, risk aversion was on the rise, investors were displaying a bit of IPO fatigue, and we wanted to make sure it traded well.
“The pipeline of technology companies coming to market is stronger than it has ever been. We are developing a really good local tech sector, but for that to work out this deal has to trade up.”
Macquarie and UBS returned to institutional investors that had supported the original Aconex IPO deal to cornerstone the new smaller, more competitively priced raise. An updated prospectus is expected to be lodged with the regulators shortly, with the listing slated for 9 December 2014. Aconex founders Leigh Jasper and Rob Phillpot were reportedly persuaded to give up $90 million in value so the float could be re-priced.
Sally Rose adds: “Aconex will be the biggest float of an unprofitable technology company in the history of the local market. At listing the company will have a market capitalisation of $312 million,” showing Australian investors are prepared to accept valuations based on revenue multiples, rather than the traditional emphasis on profit. A month ago, market talk was about an Aconex valuation between $350m and $410m.
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Looks like Francisco is doing what ever it takes to get out of Aconex. I think this is an example of how too much money invested at one time does not result in exponentially greater returns for a software company in the construction industry.
Francisco invested AU$107.5M in 2008 http://www.aconex.com/news/press-release/aconex-secures-1075-million-growth-financing-deal and now they are getting out with AU$62M http://www.theaustralian.com.au/business/dataroom/us-pe-investor-francisco-finally-exits-aconex/story-fnjw8txa-1227126861195
Unfortunately events like this will make it harder for software vendors in the construction industry to raise capital. Especially since Francisco made so much money on selling Primavera to Oracle.
On a side note our team at EADOC has enjoyed beating Aconex on large Utility deals in North America, probably one reason they moved their headquarters back to Australia from SF. The wins are even sweeter since we have not taken on any Venture money.
Eric,
Your comment seems to be misinformation which needs correction.
It appears that only AU$57.5 million was invested by Francisco Partners with the purchase of 32,857,143 shares, which is the number they are now selling. (See Au Tax Office doc, clauses 15 & 16 at http://preview.tinyurl.com/ofpfn2z )
In addition, the current IPO prospectus ( http://preview.tinyurl.com/lsy8a3j ) details a post ipo payment to Francisco Partners of US$23.5M (AU$27.5M), bringing their return up to around 9% per annum. So considering there’s been a GFC, they’ve done OK.
I guess that means your conclusions are wrong.
Bob
Author
Thanks for that response, Bob. I had just published a blog post reflecting that point.
Kind regards – Paul
Bob
My comments were based off the Aconex press release http://www.aconex.com/news/press-release/aconex-secures-1075-million-growth-financing-deal. Looks like Francisco did not fully fund Aconex which would suggest Aconex missed their milestones. Since you and Paul have a greater knowledge on the funding and details of the prospectus it would be interesting for you guys to list all the investors in Aconex and reflect on the valuation they received when Francisco invested in them to what they are worth with their IPO.
Unfortunately my conclusion still holds, that Aconex was not a good VC investment. A Good VC investment allows them to exit with 5-10X+ their original investment. Based on the details you provided Francisco will exit with $62M+$23.5M= $85.5M after investing $57.5M showing a gain of 48% over 6 years which equates to less than 8% per year. Good that they did not lose their investment but definitely not what VC’s promise their investors and will not lead to more VC targeting Construction Software Companies. So my conclusion still holds even with the revised numbers.
Eric
Author
Hi Eric, the prospectus doesn’t include a list of all the investors in Aconex – I don’t think I’ve ever found such a list either. At the time of the Francisco Partners investment, Aconex said “The company has around 100 investors, mainly high net worth individuals and families and friends of Aconex executives”.
Regards, Paul
Eric,
You’ve still understated Francisco’s position. Calculations should be done all in the same currency to get results that mean anything.
So going into it in a bit more detail and doing the appropriate historical currency conversions, Francisco’s position appears to be something like this (assuming exchange rate doesn’t change too much before the float in Dec);
(exchange rates from http://www.tradingeconomics.com/australia/currency)
3 Oct 2008, Investment of AU$57.5M @ 0.78 exch rate = US$44.85M
9 Dec 2014, Sale of 32.86M shares @ AU$1.90 = AU$62.4M @ 0.86 exch rate = US$72.55M
This is an initial profit of US$27.7M, to which is added a post-float payment by Aconex of US$23.5M. which over 6.2 years is a total profit of US$51.2M on a $44.85M investment. This works out over 6.2 years to be better than a compound interest rate of 13% per annum, or more than I had thought.
The figures I’ve used and the prospectus are publicly available and I’ve given the links, so you have as much access to the information as I do.
Your original comment asserted a $45.5M loss by Francisco.
You then revised your opinion of their return to “less than 8% per year”, when it actually looks to be greater than 13% compound.
You’re an Aconex compeditor, right? You’re showing your bias.
Bob
OK, sorry Eric.
I got the exchange rate conversion ass about.
9 Dec 2014, 32.86M shares @ AU$1.90 = AU$62.4M @ 0.86 exch rate = US$53.66M, not US$72.55M
When corrected this results in a final profit for Francisco of around US$32.38M. This is equivalent to a touch over 9% p.a. compound interest over 6.2 years, around what I originally thought.
Bob
Author
At first glance it looks a poor return on Francisco Partners investment, but the IPO prospectus does say they will get a substantial compensation payment (US$23.5m) as well as the value of their converted shares – see http://www.extranetevolution.com/2014/11/aconex-ipo-signposts-vc-exit/
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