Burger Fuel IPO cost update
Burger Fuel has announced preliminary results to 30 September 2007. The full financial results have yet to be released but the point of interest from the summary provided is the costs associated with Burger Fuel’s initial public offering (IPO). Valuecruncher estimated the cost of the IPO at approximately $810,000. This estimate was based on information provided in the prospectus scaled to account for the low level of subscriptions. Based on the NZX announcement Burger Fuel incurred IPO expenses of $1.321 million. This represents 16.5% of the $8 million raised. This is high when compared to similar sized capital raisings on the NZX by companies such as Xero (7.3%) and 42 Below (7.7%). The cost of the IPO as a percentage is even uglier when calculated as a function of the $5.25 million raised from the public (Burger Fuel founders contributed $2.75 million to ensure the offering reached the minimum $8 million required). The IPO costs represented 25% of the capital raised from the public.
An IPO was always going to be a risky approach to raising capital for Burger Fuel. The strategy specifically focused on customers and young first-time investors. It would have been very difficult to estimate the uptake prior to the IPO. In hindsight the IPO was clearly not the best strategy. The offer period was extended and the founders were required to inject $2.75 million to ensure the offer reached the minimum requirement.
Burger Fuel IPO Summary
Winners
- Advisers and Advertising Agencies
Losers
- Burger Fuel
- Founding Shareholders
- ~2,400 Public Investors
Valuecruncher analysis of the operating performance will follow the release of Burger Fuel’s full financials.