Online electronics retailer Kogan has announced an initial public offering to raise $50 million, with plans to list on the ASX at the end of June.

Kogan, founded in 2006, said it would have a market capitalisation of $168 million on the listing, and is offering new shares at an offer price of $1.80 per share.

The company, which grew from an initial product range of two LCD televisions to 52 million site visits a year, plans to use the funds for growth capital, including investing in new products and categories. ‘The way people buy goods and services in Australia has undergone significant change in the past ten years,’ founder and chief executive Ruslan Kogan wrote in its prospectus lodged with the Australian Securities and Investments Commission.

‘As the market continues to expand and redefine itself, we will continue to evolve Kogan.’

Mr Kogan and chief operating officer David Shafer will retain around 69.2 per cent of the company, to be held in voluntary escrow agreements.

The company in its prospectus said it expects forecast revenue for financial year 2017 to be

$241.2 million and EBITDA to come in at $6.9 million. It has not had any prior external equity funding.

In March, Kogan purchased Dick Smith’s online retail business for an undisclosed sum and said it is integrating the online assets into its core business. The company is also expanding into new verticals in travel and mobile.

The float follows the disastrous listing of Australian retailers Dick Smith and Myer, with Myer’s shares trading at $1.16, well below their listing price of $3.88, and Dick Smith shutting up shop earlier this year.

Required

(a) Describe Kogan’s business model and what it means to ‘float’ on the Australian Securities Exchange.

(b) Approximately how many shares are being issued to raise the $50 million?

(c) Kogan forecasts revenue of $241.2 million for 2016/2017 with pre-tax earnings of $6.9 million.
Using financial information for the most recent years, report on Kogan’s revenue, pre-tax earnings, after-tax profit, and earnings per share.

(d) Graph Kogan’s share price since listing on the ASX and explain the trend. What has happened to the value of Mr Kogan and Mr Shafer’s 69.2% stake in the business since listing?