Failed listed resources companies are finding a profitable future above ground – in technology.
Since January, at least eight struggling resources companies, including Latin Gold and Macro Energy, have merged with technology companies. Start-ups and companies looking for alternative capital raising mechanisms are using the “zombie” companies as shell vehicles for backdoor listings on the Australian Securities Exchange.
Last week, Perth-based Intercept Minerals announced plans to acquire US online streaming business xTV for $12.5 million.
Operating conditions are difficult for the small end of the resources sector. The median spend on exploration activity fell 27 per cent in the first quarter, BDO’s March Explorer Quarterly Cash Update said, noting that it was the biggest such decrease since it started looking at the trends.
Perth-based analyst Peter Strachan estimates that more than two thirds of listed resources companies have less than $2 million net cash.
“Over the last few years there has been a capital strike,” Mr Strachan said. “A lot of exploration companies are sitting around watching the paint dry and thinking about how to make some money.”
Resource development company Aviva Corporation acquired cloud-based financial planning platform Decimal in January in a reverse takeover. It is now listed on the ASX as Decimal Software. The company’s shares were pushed to an all-time high on the announcement.
Perth tech entrepreneur Zenya Tsvetnenko has used backdoor takeovers to list two of his companies this year. Earlier this month, failed graphic explorer Lithex Resources announced it would acquire his internet marketing business, Mpire Media, in a reverse takeover.
In March, Mr Tsvetnenko’s Digital BTC became the country’s first bitcoin business to trade on the ASX after a backdoor listing through Perth-based oil and gas explorer Macro Energy.
Mergers and acquisitions in the energy, mining and utilities sector in Australia increased 64 per cent in the year ended June 30, according to an M&A trend report from The Mergermarket Group.
Mr Strachan said backdoor listings were a quick and easy way for companies to join the ASX, giving them access to cash and the spread of at least 300 shareholders required to be listed.
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