Raiz Invest Ltd, a two-year old fintech launching its initial public offering, has set investors a challenge by not providing any revenue or earnings forecasts in its prospectus.
Raiz is looking to raise $15 million, with the issue of 8.4 million shares at $1.80 a share. On completion of the offer, the company will have a total of 66.2 million shares on issue, with an indicative market capitalisation of $119.2 million.
The financial statement in the prospectus shows that Raiz has grown revenue from $166,000 in 2015/16 to $1.04 million in the six months to December last year. It lost $2.4 million last financial year and it had negative cash flow from operating activities.
After the completion of the offer the company will have net assets of $33.5 million. With 66.2 million shares on issue the net asset backing per share will be just over 50 cents.
Raiz is a micro-investing platform. Since its launch in Australia in February 2016, as Acorns Grow Australia, it has grown to $170 million of funds under management. It has attracted 440,000 customers since launching, with more than 155,000 currently active on a monthly basis.
In January this year a joint venture between Acorns Grow Australia and Acorns US came to an end (hence the name change), although Acorns US remains a minority shareholder of Raiz. As part of the deal, Raiz holds an exclusive, perpetual and irrevocable right and licence to use and further develop the technology platform originally provided by Acorns US.
The company says its micro-investing application appeals to a “new generation of investors who would traditionally not have access to investment markets.” Seventy per cent of customers are aged between 18 and 35. The platform is available via a smartphone app or website.
Raiz customers are able to invest automatically into a selected portfolio of exchange traded funds. Raiz offers six ETF portfolios.
One of the platform’s key features is the ability to allocate fractional interests in ETF units to individual Raiz customers. The ETF units are held in a pooled account; the system facilitates the purchase of the relevant number of ETF units required across the fund and allocates fractional interests in these units to individual customers.
Customers can open a Raiz Investment Account with $5. They can invest by making lump sum deposits, activate round-ups (investing virtual “spare change” from daily purchases), set up a regular savings plan or use a rewards program with partner brands.
Raiz has also developed machine learning and artificial intelligence algorithms to assist customers manage their everyday finances through an offering called My Finance. It is a personalised overview of where their money is sent and forecasts future cash flow.
It also offers a superannuation fund, Raiz Invest Super. The product disclosure statement was lodged with ASIC in April.
The company’s executive team is led by chief executive George Lucas. Prior to founding Raiz, Lucas was the chief investment officer of Mariner Financial. He is also the managing director Instreet, a provider of structured investment products.
According to the prospectus, the money raised in the IPO will be used to advance the business strategy, meet its regulatory requirements and pursue growth in new markets, such as Indonesia, Malaysia and Thailand. The company has established an office in Indonesia but is not yet operating there.
Last year the company spent $26,000 a month on advertising. More funds will be invested in marketing.
Raiz says it will continue to develop an innovative range of financial services and products.
Raiz charges a monthly fee of $1.25 to active customers with account values of less than $5000. Currently, 71 per cent of revenue is generated from these monthly fees.
If a Raiz Investment Account has a value greater than $5000, no maintenance fee is charged. Instead, an annual account fee of 0.275 per cent is charged, applied monthly. This currently accounts for 8 per cent of revenue.
Raiz does not charge switching fees or transaction costs. However, where the acquisition or disposal of ETF units does not require a transaction on market, Raiz applies a buy/sell spread, also known as a netting charge. This accounts for 9 per cent of revenue.
Raiz also gives advertisers access to its data. This accounts for 12 per cent of revenue.
The offer open on May 17 and closes on June 1.