Australian Securities Exchange-listed mining software company K2fly will assess “alternative capital structures” under a wide-ranging strategic review led by Argonaut PCF and Atrico.
The company has built an impressive international mining client list and grown its annual recurring revenues and total contract value over the past few years.
“K2fly has delivered 13 quarters of revenue and ARR growth amounting to a 48% CAGR for the past three years,” CEO Nic Pollock said earlier this month.
“We have contracts in place with seven of the top 10 global mining leaders and our land and expand strategy continues to evolve with more customers signing [up for] additional solutions.”
Despite its progress, and significant increases in the enterprise values of peers reflected in private-company M&A in the past 3-4 years, K2fly has lost about two-thirds of its public market value since the start of 2021. Argonaut was lead manager to a A$1 million K2fly placement at 10c-a-share announced earlier this month.
Australian-based private mining software leader Maptek became K2fly’s largest shareholder via a 2022 equity buy-in at 18c-a-share and increased its stake to 17.7% through the new placement.
K2fly and Maptek have a standstill agreement in place for 12 months but K2fly shareholders can vote to adjust that or accept a third-party control offer.
K2fly has about 175 million shares on issue.
Argonaut is a Perth-based stockbroker with a significant focus on mining and metals. Atrico, also Perth-based, has been a leading corporate advisor in the international mining and resources technology space for the past 20 years.
K2fly said the strategic review would assess strategies and “optimal corporate structures to realise the full potential of K2fly and may lead to third parties submitting proposals that will deliver value to K2Fly shareholders”.
Chair Pauline Vamos said: “Despite continued high growth and a significant addressable market in resource governance coupled with strong ESG tailwinds there has been a significant gap in how the equity market is valuing K2fly.
“As such it is the responsibility of the board to assess alternative capital structures to provide the best opportunity for continued success of K2fly and realise best shareholder value.
“We expect significant interest from parties wanting to gain access to this new and exciting market opportunity who would not otherwise access its potential via public equity markets.
“The process will begin this side of Christmas and the board anticipates that it will be able to update the market in the first quarter of calendar 2024. Management will continue its dual focus on continued market growth and attainment of cashflow breakeven.”
The head of a large, private mining software company told InvestMETS.com last year he thought the ASX was “certainly not the place to have valuations in line with what other M&A transactions are experiencing right now”.
“That may change, but ASX has not been a great place for tech stocks ever really.
“There are many very good companies that trade well below what they might on NASDAQ or off a public exchange.”
