Venture Capital Firm Powerhouse Seeks to Raise $20m in IPO
Powerhouse’s investment portfolio has achieved 35% growth in the book value of its investment companies since 2009.
Powerhouse Ventures Limited is a venture capital firm focused on early stage technology companies in New Zealand. In partnership with universities and government owned research institutes the company seeks to identify and invest in Intellectual Property (“IP”) which it intends to commercialise. Powerhouse’s portfolio comprises of 19 companies which are currently all located in New Zealand.
Powerhouse’s investment portfolio has achieved 35% growth in the book value of its investment companies since 2009. Continuation of this trend and crystallisation of capital sales via spin offs or other liquidity events is a major value driver. The company aims to diversify into the Australian market which could significantly increase the total accessible market.
However, Powerhouse is focused on investing in early-stage companies which carries elevated risks as their business success remains to be validated. The company is reliant on external funding to execute and expand its investment portfolio and there is no guarantee ongoing funding will remain available. Pro forma income includes revisions of the book value of the investment portfolio rather than just cash flow.
The increase in book valuation is an attractive quality and diversification of its portfolio could mitigate elevated risks which are typically associated with investments in companies at this stage of the cycle. Validation of its business plan via liquidity events could be a major value driver, however the company has no track record of realising material value and there is no guarantee that this can be achieved at a reasonable cost.
Company: Powerhouse Ventures Ltd
ASX Code: PVL
Shares on Offer: 18.7m
Listing Price: $1.07
Market Capitalisation: $40.8m
Listing Date: September 28
Author: Simon Herrmann
Aug 22, 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.