IPO watch: Registry management competitor targets new markets

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A recent entrant into the registry management business, Registry Direct, has issued a prospectus outlining plans to take a service that is most often used by listed companies into the unlisted company market.

Registry Direct is aiming to raise up to $6 million, with the issue of 30 million new shares at 20 cents a share. If it meets that target, the company will have a market capitalisation of $20.6 million at listing.

The offer closes on October 5 and the company expects its shares to start trading on the Australian Securities Exchange on October 5.

Registry Direct was established in 2012 and began operations in 2014 as ShareandFund Pty Ltd, changing its name to Registry Direct in 2015. It has 11 employees and six contractors.

According to the prospectus, it has a low-cost cloud-based system that will make it a cost-effective alternative to the incumbents, such as Computershare and Link Market Services, and also affordable for companies that do not currently use registry management services.

A registry service tracks the owners of securities issued by companies and trustees and facilitates connections between issuers and their securities holders.

Under the Corporations Act, it is a requirement for Australian companies to keep records relating to their securities registers. It is standard market practice to outsource the maintenance of these registers when a company lists on an exchange.

Registry Direct commissioned Arkaba Advisers to prepare an industry report for inclusion in the prospectus. It says the number of companies listed on the ASX, which stands at around 2300, has grown at an average of 5 per cent a year since 2010.

Arkaba estimates that Computershare has a 40 per cent share of ASX-listed entities with external registry services, Link has a 25 per cent share, Boardroom 12 per cent and others have 23 per cent.

The Arkaba report says opportunities for registry businesses include provision of services to unlisted companies, crowdfunding platforms and employee share schemes.

Registry Direct says its delivery as a Software as a Serve product provides “a contemporary and flexible solution” that aims to transform the way in which issuers manage their securities registers. Registry Direct uses Amazon Web Services for hosting services.

The company’s revenue has grown from $236,000 in 2014/15 to $367,000 in 2015/16 and to $647,797 in the year to June. It made a loss of $1.1 million in 2016/17.

Registry Direct has 60 clients, 14 of which are listed on the ASX, with a total of 20,000 security holders.

The company will use the capital raised in the offer to fund the development of additional features on the platform, as well as sales and marketing.

It has a couple of growth strategies. It is targeting private and unlisted public companies keen to improve their compliance management. And it is offering white label capabilities, allowing lawyers, accountants and other advisers to use the platform to offer registry or company secretarial services.

It says services currently available to unlisted companies offer limited functionality. “What these systems typically lack, compared with the systems used by listed companies, is a platform to connect security holders directly with the register records. Typically, they do not have a shareholder portal, online voting functionality, an ability to pay dividends and reconcile the payments, online application forms to assist in raising capital or other functionality to facilitate investor communications or governance processes.”

Registry Direct is proposing to offer all these things on a cost-effective basis.

Its functionality includes allotting shares, issuing holding statements, transferring securities, ATO and other reporting, capital raising and other corporate actions, reporting and paying dividends, anti-money laundering, KYC and FATCA compliance, employee share plan administration, distribution of company announcements, meeting services and investor portals.

Each shareholders receives online access to a shareholder portal that gives them access to company announcements, voting, dividend statements, transaction history.

One important differentiator is that the cloud-based service allows client issuers to execute registry work themselves.

One significant business risk detailed in the prospectus is that Registry Direct has historically relied on a relatively concentrated customer base with the top two clients contributing 66 per cent of revenue in 2015/16 and 64 per cent in 2016/17.

Another issue is keyman risk. Founder and managing director Steuart Roe, a former investment banker at Citigroup and UBS, will hold 48 per cent of the shares upon listing (assuming the maximum subscription is reached).


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