CropLogic IPO Review
The Agtech world continues to buzz as CropLogic commences it’s IPO capital raising. The New Zealand based company provides advice to large scale crop growers, by combining advanced research and technology services that aim to improve efficiencies and ultimately crop yields.
What does the Company do?
CropLogic use a range of Internet of Things (IoT) connected sensor devices to accurately gather farm data, and deliver valuable insights and analysis to growers. Sensors collect data on a range of variables that include weather data, soil monitoring for moisture and temperature levels and geospatial information. Readings are then input into crop modelling software used to predict plant health and expected growth, enabling farmers to spend less and make better crop management decisions.
How much will the IPO raise?
Earlier this year CropLogic completed a $2m pre-IPO round of funding that was oversubscribed in May. The company is now aiming to raise between a minimum of $5m up to a maximum $8m worth of new capital from the IPO. If successful, this will see the company valued at between approximately $21m – $24m, giving it a free public floating share balance of over 25%.
The company generated gross profit from sales of $56,171 in the year to 31st March 2017, from revenues of $124,906, which is a healthy margin, though both profit and revenue were down slightly from the previous year. After full expenses CropLogic reported a loss of $1.3m, with the most recent accounts showing current cash in bank of ~$80,000.
The company has two classes of convertible notes issued that will convert to shares after the IPO. Class A represents just under 1% of the company’s issued capital at 16 cents per share, while Class B represents approximately 20% of all the company’s stock to be issued at 11 cents per share, a 45% discount to the offer price.
What will the funds be spent on?
Most of the new capital will be used to implement CropLogic’s market development strategy, targeting predominantly the larger US agriculture market, and to conduct further research and development to enhance product value.
The focus of the market development strategy revolves around the prior acquisition of US based company Professional Ag Services Inc. The intention is to leverage their established relationships and industry networks to expand CropLogic’s international market share. Initially this will target potato growers across Washington, Idaho and Oregon. CropLogic purchased the company for a maximum of $1,850,000 USD, contingent on revenue milestones and to be paid over three years. Professional Ag Services Inc. Key management have been retained and taken on board as employees.
CropLogic’s growth prospects will depend largely on the success of this strategy, and the extent to which the acquisition can deliver in-roads into the lucrative US market.