{"id":38223,"date":"2023-10-20T14:55:00","date_gmt":"2023-10-20T14:55:00","guid":{"rendered":"http:\/\/startupsmart.test\/2023\/10\/20\/five-takeaways-from-kogans-ipo-plans-startupsmart\/"},"modified":"2023-10-20T14:55:00","modified_gmt":"2023-10-20T14:55:00","slug":"five-takeaways-from-kogans-ipo-plans-startupsmart","status":"publish","type":"post","link":"https:\/\/www.startupsmart.com.au\/uncategorized\/five-takeaways-from-kogans-ipo-plans-startupsmart\/","title":{"rendered":"Five takeaways from Kogan’s IPO plans – StartupSmart"},"content":{"rendered":"
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Australian online retailer Kogan.com released its initial public offering (IPO) plans last week, as the company hopes to raise $50 million in share sales.<\/p>\n

Kogan.com was founded in 2006 by entrepreneur Ruslan Kogan and currently attracts more than 620,000 unique customers per annum.<\/p>\n

The company\u2019s revenue for the 2015 financial year was $200.3 million, which increased to approximately $201.1 million for the current financial year. Revenue is forecast to increase to $241.2 million for the 2017 financial year.<\/p>\n

The prospectus reveals Kogan.com has recorded positive earnings before interest, tax, depreciation and amortisation (EBITDA) for 10 years, with EBITDA forecast to come in at $6.9 million for the 2017 financial year.<\/p>\n

Kogan.com will be selling approximately 28 million shares at a price of $1.80 each, with offers opening on the June 17. The retailer plans to list on the Australian Securities Exchange by July with an expected market capitalisation of $168 million.<\/p>\n

With Kogan.com\u2019s founder and chief executive Ruslan Kogan claiming the float will be \u201cdifferent to all the others\u201d, SmartCompany took a closer look at Kogan.com\u2019s prospectus.<\/p>\n

Here are five key takeaways.<\/p>\n

1. The Dick Smith acquisition does not factor in the company\u2019s sales forecasts<\/h3>\n

Kogan.com acquired the intellectual property and online businesses of Dick Smith electronics in March this year for $2.6 million, according to the prospectus.<\/p>\n

However, this acquisition was not taken into account when calculating revenue forecasts for the retailer\u2019s IPO.<\/p>\n

This means that Kogan.com\u2019s valuation and revenue forecasts could be significantly higher than suggested, if its operation of the Dick Smith brand is successful.<\/p>\n

Included in the acquisition were 1.5 million Dick Smith email subscribers, which Kogan.com says 1.3 million of are not Kogan.com subscribers.<\/p>\n

The company may release products under the Dick Smith private label brand in the future but has not released detailed plans.<\/p>\n

\u201cKogan.com believes that significant financial benefits will arise from the integration of the Dick Smith assets, in the form of increased revenue and earnings,\u201d the company says.<\/p>\n

\u201cHowever, given the Dick Smith Assets were not acquired as a going concern, Kogan.com has no reliable basis upon which to quantify the financial or operating performance of the Dick Smith Assets under Kogan.com\u2019s ownership.\u201d<\/p>\n

2. Kogan will retain a significant chunk of the business<\/h3>\n

Both Ruslan Kogan and executive director David Shafer will retain 69.2% of Kogan.com following the float, with Kogan retaining 50.5% and Shafer retaining 19.1%.<\/p>\n

This equates to 59.5 million shares, or approximately $107 million at the initial offer price of $1.80<\/p>\n

Of the $50 million raised through the float, Kogan and Shafer will take $15 million of that, split to $7.5 million each.<\/p>\n

This is in exchange for selling a part of their ownership.<\/p>\n

Kogan has defended this action, telling Fairfax investors had \u201cdemanded more liquidity\u201d in the business.<\/p>\n

Kogan and Shafer will be able to sell their shares further down the line, after the company\u2019s listing.<\/p>\n

However, Kogan is not planning to do so anytime soon, saying \u201cmy name is on the door, this is my baby. I can\u2019t imagine doing anything else.\u201d<\/p>\n

3. IPOs come with risks<\/h3>\n

The Kogan.com prospectus outlines a number of risks for potential investors to keep in mind.<\/p>\n

In his chief executive\u2019s letter, Kogan said Kogan.com is a business \u201csubject to a range of risks\u201d, including reduced growth in the retail market and increased competition.<\/p>\n

Kogan encouraged investors to read the prospectus carefully before making investments.<\/p>\n

Section five of the prospectus addresses these risks, ranging from intellectual property infringement claims, to potential search engine marketing cost increases.<\/p>\n

Kogan lists the acquisition of Dick Smith assets as a risk, stating there could be a risk that the Dick Smith assets will not be properly integrated into the site.<\/p>\n

The prospectus acknowledges natural occurrences such as developments in technology, which could \u201clead to increased obsolete inventory risk, if change results in a shift in customer preferences for certain products\u201d.<\/p>\n

Data loss and theft is also covered in the risk section, acknowledging the risks of online business operating in the modern day.<\/p>\n

4. The employee offer includes a bonus for employees<\/h3>\n

Certain key management personnel and certain other senior management will receive a one-off bonus from the listing, coming in the form of shares.<\/p>\n

The amount of this bonus will be $1.18 million to be included with the IPO\u2019s Employee Offer, and will not be available to Kogan and Shafer.<\/p>\n

The employee offer is only open to Kogan.com employees who have received an invite to bid from the company itself, which reserves the right to make the decision.<\/p>\n

There will be 657,638 shares available to employees under the Employee Offer, totalling at approximately $1.1 million.<\/p>\n

5. Kogan.com will continue to grow its non-electronics business<\/h3>\n

The prospectus also gives an insight into Kogan.com\u2019s future business model.<\/p>\n

\u201cKogan.com believes that it is part of a \u201cNext Generation\u201d of Online Retailers who are evolving the Online Retail format beyond its origins as a disruptive, low\u2011cost distribution platform,\u201d states the prospectus.<\/p>\n

Kogan.com plans to expand its recently launched travel and mobile verticals, which have accounted for 3% of the company\u2019s gross transaction value in the first half of the 2016 financial year, while dicksmith.com.au is included in the retailer\u2019s listed Core Website Channels.<\/p>\n

The prospectus also outlines the increasing diversity of Kogan.com\u2019s private label brand products, which have contributed to a 19% increase in the amount of general merchandise sold by the retailer from 2014 to 2016.<\/p>\n

This indicates Kogan.com\u2019s private label brands will continue to cover more bases, compared to the consumer electronics focus of years earlier.<\/p>\n

This article was first published on SmartCompany.<\/a><\/em><\/p>\n

Follow StartupSmart on<\/em>\u00a0Facebook<\/a>,<\/em>\u00a0Twitter<\/a>,<\/em>LinkedIn<\/a>\u00a0<\/em>and\u00a0<\/em>SoundCloud<\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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