News & Analysis

Online retailer Booktopia abandons crowdfunding after falling short of its target

- June 11, 2019 3 MIN READ

Booktopia CEO and co-founder Tony Nash

 

  • Online bookseller Booktopia wanted to raise $10 million from an equity crowdfund
  • Despite having nearly 2 million customers, just 850 people invested, raising less than 9% of the target
  • The Sydney-based retailer is now talking to private investors 
Leading Australian book retailer Booktopia has walked away from its attempt to raise $10 million through equity crowdfunding platform Equitise after failing to attract more than 9% of that target from investors.

The response from investors was so lacklustre that before the offer closed this week, it sat at less than a third of the minimum subscription raise of $3 million.

In the last two months, the Equitise campaign attracted less than $30,000 to take the final total to $893,750.

The retailer announced last November that it was seeking to raise $10 million for 8.1% of the business at $1 a share with a minimum investment of $250. It was meant to be Australia’s largest equity crowdfunding campaign.

That figure would have valued the business at more than $123 million. The company’s revenue had increased 12-fold since 2009, from $9.4 million to ​$113.9 million in 2018 at a compound annual growth rate of 31.9%.

It’s not the first time the market has rejected a nine-figure valuation for the business, launched in Sydney in 2004 – on the same day as Facebook – by Tony and Simon Nash, and Steve Traurig as a side hustle to their internet recruitment agency; a 2016 ASX listing failed when institutional investors didn’t take up the $40 million IPO.

The retailer says it has had more than 5.2 million customers in Australia and New Zealand over 15 years, with more than 1.8 million repeat customers, with a sale recorded every 6.1 seconds, they shipped over 4.7 million items in FY18.

Booktopia wanted to use the crowdfunding to expand automation, increase stock levels – it has 148,000 titles in stock and wanted to increase that to 220,000 by 2020 – and fund liquidity.  $5 million was allocated towards the automation of its 13,000-square-metre western Sydney distribution centre, which currently operates at 25% of capacity. $3 million was to be spent on increasing stock levels, with plans to hold 2.2 million items, up from 601,000 currently, by 2020.

CEO and co-founder Tony Nash says the company will now look for private capital from growth funds, high net worth (HNW) individuals and others after the Booktopia Board called an end to the Equitise plan.

“We have started the process of exploring significant investment from a variety of sources including venture capitalists, home offices and wholesale investors, ” he said.

“We have been humbled with the traction the offer received with over 850 keen investors. At this time, however, despite the great support, it’s not as much as we would have liked to continue with this route of capital raising.

“We’re grateful to our partner Equitise for their unrelenting support and will look to engage in an Equity Crowdfunding campaign again in the future when the timing is more optimal and we’ve been able to scale thanks to larger investment. We still love the idea of our customers being part owners in Booktopia.”

Nash said they’re now in discussions with sophisticated investors, hoping they’ll see Booktopia’s 5-year forecasts and the company’s ongoing profitability – despite the arrival of Amazon in Australia – as a worthwhile investment.

He said there was little-to-no resistance from the investment community about Amazon’s impact on Booktopia’s future.

“Most people realise that their entry into the Australian market has not necessarily been all that it was hyped up to be particularly in regards to books which only makes up 4.48% of its products,” he said.

“I do believe that in time they will be a major player in the Australian market in many segments other than books, however, it is going to take longer than people were expecting.”

Chris Gilbert, co-founder of Equitise, blamed “a lack of awareness from some investors that they could invest in unlisted companies like Booktopia” as one of the reasons for its failure.

Nash said the focus for the business continues to be the fast-tracking and execution of its growth strategies.

The company made a $1.9 million profit before tax in FY2018 following a $3 million loss in FY17 in the wake of the failed IPO.

The failed float punched such a significant hole in the business that the Offer Information Statement (OIS) accompanying the Equitise campaign noted that Booktopia’s current liabilities exceeded its assets by $13.77 million, and net assets were negative $3.3 million at the end of FY18.

Booktopia has won numerous accolades, including the 2018 Telstra Business Awards NSW Business of the Year and its national People’s Choice Award, as well as being voted Bookstore of the Year in 2016 and 2017.

The company also owns the Angus & Robertson brand, acquiring it from Penguin Random House in August 2015.

 

 

 

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