Callaghan Innovation ‘in conversation’ with GeoOp about NZX delisting

Callaghan Innovation says it is “in conversation” with GeoOp [NZX: GEO] after the software developer said it was heading offshore to the ASX.

It intends to de-list from the NZAX.

Only last week GeoOp announced its research and development grant from the Crown incubator had been extended for two more years, worth up to $5 million.

A Callaghan Innovation spokeswoman says it is having discussions with the fledgling software company and will have an update tomorrow morning.

GeoOp, whose shares last traded at 22c, was put in a trading halt this afternoon by the NZX at the company’s request.

GeoOp, which designs job manangement software,  says it will launch an initial public offering of $A3-6 million on the ASX, with a share price of 17-20Ac.

The company says it has to achieve a market capitalisation of $A15 million under ASX rules. Its market cap on the NZX is $16.3 million.

GeoOp says it asked for a trading halt in the interests of the company and shareholders.

“Balancing the need to raise enough capital to fund the operation of the business and meet the ASX’s listing requirements, Geo’s directors wish to avoid raising capital at dilutive pricing that would prejudice existing shareholders,” the company says.

“In isolation, Geo should have been able to mitigate against pricing and dilution risk through completing the IPO at the low end of the range ($A3m) if confronted with a large offer discount. However, this would have presented a dilemma because if the pre-IPO price falls before the IPO is priced and investors require a higher offer discount, Geo may have had to raise more than it would otherwise wish to raise at a lower price to meet the ASX admission criterion.”

GeoOp says the main challenge is that its shares are highly illiquid and there is usually a “wide bid-offer spread,” leading to the possibility that small share sales could force the IPO pricing down and cause “unnecessarily low pricing” that could be under the ASX threshold.

Finally, GeoOp says the trading halt will allow it to price the IPO “in an orderly manner, protect the interests of its shareholders, give greater certainty to the IPO proceeding and eliminate the potential impacts of market manipulation.”

GeoOp shareholders will be asked to vote on the de-listing next month.

GeoOp went public in 2013, selling shares at $1 apiece in private offer before its compliance listing on the NZ Alternative Index. The stock last traded on the NZAX at 22c, giving it a market capitalisation of $16.3 million. In previously released presentation notes detailing its desire to migrate to the ASX, GeoOp said its management team is located in Australia, 60% of group revenues are generated there, and its major shareholders are Australian.

GeoOp's products include GeoServices, for mobile workforce and job management, and GeoSales, a mobile sales workforce management app, and it is soon to launch its GeoCare mobile human services management tool. The company has 27,000 clients in 30 countries, including the Auckland Council, Downer and TrustPower.

In May, GeoOp said for the third quarter it increased revenue 5.6% on the previous quarter, with monthly revenue at $400,000 and average monthly cash burn of $200,000.

“GEO expects to continue to reduce its monthly cash burn as the company trends to profitability, although notes that it intends increasing spend on product development, customer experience and marketing to accelerate growth in future reporting periods,” the company said.

(Additional reporting BusinessDesk)

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