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Shark Mitigations Systems - Will the IPO Keep Above Water?

Shark Mitigations Systems - Will the IPO Keep Above Water?
There were 22 unprovoked cases of shark attacks within Australian waters during 2015 according to the Taronga Conservation Society Australia (TCSA)
Mar 30, 2016 By Simon Herrmann

Shark Mitigation Systems Ltd seeks to raise $4 million in a $11.5 million listing.

There were 22 unprovoked cases of shark attacks within Australian waters during 2015 according to the Taronga Conservation Society Australia (TCSA). There was one fatality while 14 people were injured. The number of unprovoked cases was well above the decadal average of 13 cases per year. On a worldwide scale we recorded 98 unprovoked attacks, with six fatalities. The 2015 yearly total was the highest on record, surpassing the record of 88 attacks in the year 2000.

Why is the number of shark-human interactions rising? There are many potential reasons, but the most conclusive theory is that the number of incidents is directly correlated with the total amount of time humans spend in the water. Even though shark population is declining in many areas of the world, the human world population continues to expand, hence there are more people in the oceans.

A Perth based technology company has set out on a mission to research and commercialise a technology to mitigate the occurrence of shark attacks. The company was incorporated in April 2011 and is now seeking to list on the Australian Securities

Exchange (“ASX”) on 24 March via an initial Public Offering.
Shark Mitigation Systems’ primary asset is a deterrent technology called Shark Attack Mitigation Systems (“SAMS”), as well as a shark detection system called “Clever Buoy”. The SAMS technology is a result of extensive research relating to shark behaviour and has been incorporated in prototype wetsuits and neoprene materials. Clever Buoy has been developed in partnership with Optus and also benefitted from an early funding injection of Google. The Clever Buoy technology is in the final stages of precommercialisation testing and the company anticipates first revenues by the middle of 2016.

Primary hurdles for the IPO include funding obligations and IP protection. Shark Mitigation has applied for patents to protect its IP portfolio, however none of these patents have been granted yet.  Even though the company expects to generate first revenues later this year, the prospectus does not specify how much or how it aims to achieve this milestone.

We have witnessed an increasing number of speculative technology listings on the ASX. While many face a challenging international competitive landscape, technology underlying Shark Mitigation Systems appears a natural extension of the local surf life saving culture. Investors need to have a high risk appetite for this start-up, however with its capital structure conducive for growth in the event of commercial success, the outlook appears balanced.

IPO Details

Company: Shark Mitigation Systems Ltd

ASX Code: SM8

Shares on Offer: 20 million

Listing Price: $0.20

Market Capitalisation: $11.5 million

Listing Date: Mar 24

This article has also appeared on The Australian.

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Simon Herrmann Author: Simon Herrmann Mar 30, 2016

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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