Despite increasing talk of caution about early-stage start-up listings, Israeli supply chain integrity and anti-counterfeit technology firm Security Matters is set to join a group of its peers with an IPO on the Australian Securities Exchange.

The pre-revenue company is commercialising technology originally created by the Israeli government at the Soreq Nuclear Research Centre, which permanently “marks” any object in solid, liquid or gas form, verifying its origins and making it possible to track it through the supply chain.

It is raising up to $6.5 million through the float and expects to have a market capitalisation of up to $20 million when it lists on September 18.

The listing comes at a time when the ASX is actively dissuading some early-stage tech companies from listing in order to shore up the reputation of the exchange. In May the exchange revealed it had knocked back about 60 companies since introducing a vetting process for listings in 2016, but also convinces many more they’re too immature to list.

In Monday’s The Australian Financial Review, Freelancer chief executive Matt Barrie said he believed pre-revenue companies should remain private, and that businesses shouldn’t be launched on the sharemarket unless they were certain of their next eight quarters of revenue.

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However, Security Matters chief executive Haggai Alon, who is in Australia this week meeting investors as part of the company’s roadshow, told the Financial Review the company was getting strong traction in the Australian Israeli tech community.

“I can say in the most modest tone that we will be very oversubscribed,” he said.

“I think the fact that we met the regulations here, and have appointed an experienced banker in RM Corporate Finance and an experienced legal advisory firm in Holding Redlich, shows we took the right people from the Australian business ecosystem and demonstrates to investors and regulators that we’re here to stay and we are extremely serious.”

The company needs to raise funds to continue to develop its product, which it describes as a “sub-molecular-based hidden barcode system” that can be read using a unique reader.

Ownership data of the products tracked by its system will be held on blockchain technology, which the company is in the early stages of developing.

Former ANZ board member and current NEXTDC non-executive director Dr Gregory Clark has joined the Security Matters board, alongside co-founders of Israeli solar energy company Arava Power, Ed Hofland and David Rosenblatt.

Last year Security Matters’ operating expenses were $2.6 million and it has a $US500,000 ($690,000) loan from its major shareholders incurring 4 per cent interest per annum. Following the IPO, it intends to start paying down the loan.

The company has not provided any forward estimates, but Mr Alon said he expected the business to be generating revenue in 2019.

It has agreements at various stages (some are letters of intent or memorandums of understanding) with companies such as listed Israeli plastics producer Kafrit Industries, Canadian diamond manufacturer Crossworks Manufacturing and the Perth Mint.

ASX executive general manager of listings and issuer services Max Cunningham said the exchange did not comment on particular companies before they list, but being pre-revenue was not necessarily a cause for concern.

“Many companies list pre-revenue – Xero is a notable example, others include Superloop and LiveTiles. Afterpay Holdings had recorded revenue of less than $250,000 at the time of its listing, and there are many more in the mining and medtech/biotech sectors,” he said.

“ASX focuses on whether it is the right time for a company to list.”

Prior to the IPO, Security Matters has raised $US4.5 million from Israeli co-operatives linked to its board members.

Mr Alon said the business could have gone down the path of raising VC funding, but chose not to.

“Venture capital is about global business development connections and international experience from executive management skills,” he said.

“Those two things cost you a lot by taking their money and, to be honest, we don’t need those ingredients.”





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