SLI Systems co-founders Geoff Brash and Steve Marder were two of the initial shareholders of the search engine developer who sold some 6.8 percent of the company at the end its 16-month lock-up period at 23 percent below last year’s offer price in a placement largely made up of institutional investors.
Brash, vice president of SLI’s business intelligence, halved his stake to now hold 1.2 million of SLI shares, while non-executive director Marder reduced his holding by 410,000 shares to 4.3 million shares, the Christchurch-based software developer said in a statement. Brash said “personal and family circumstances” prompted his sell-down, and that he still retains support in the business. All up, initial shareholders sold off some 4.2 million of the 40.1 million locked-up shares at $1.15 apiece yesterday.
That’s below the $1.50 price the shares sold at in May last year when SLI raised $27 million in an initial public offering, of which $12 million went to the existing shareholders. Yesterday’s sale reaped a further $4.8 million for the initial shareholders, who had agreed to place about two-thirds of the firm’s issued stock in escrow until the company released its 2014 annual results.
Chief executive Shaun Ryan, who didn’t sell down his 4.2 percent stake, told BusinessDesk the initial shareholders decided to coordinate the share sale when the escrow came off, and engaged Forsyth Barr and Craigs Investment Partners to do so.
“The majority of shareholders didn’t want to sell at this sort of price, myself included,” Ryan said. “Everyone has their own reasons why the want to sell, some people have had shares for 13 years, some people have their entire net worth tied up in there.”
SLI’s initial shareholders included Pioneer Capital, Lynnwood Holdings, Marder Media Group, Grant James Ryan Family Trust, Geoffrey Michael Brash, Shaun William Ryan Family Trust, Michael Arthur Grantham, Kevin Taylor Family Trust, and Rob van Noblen Family Trust, according to its prospectus.
The shares fell 2.3 percent to $1.29 on the NZX today and have declined some 54 percent from a high in January of $2.90.
Grant Williamson, director at Hamilton Hindin Greene, said the end of the escrow period created an overhang for the stock, which led to its weakness.
“A reasonably large number of shares that the holder is looking to sell is creating an overhang and therefore buyers will be a little bit cautious until that is removed,” Williamson said. “With those crosses going through yesterday at a $1.15 that’s caused a little bit of selling on the market today to bring the market price closer to that crossing price that we saw yesterday.”
Last month SLI posted a loss of $5.7 million for the 12 months ended June 30, smaller than the $7.2 million loss forecast in its offer documents in May last year. Operating revenue was $22.1 million, about matching its forecast for $22.2 million, while cash reserves were $11.4 million, versus the $7.3 million flagged in its prospectus.
SLI is forgoing short-term profit and reinvesting earnings to fund its growth plans as it hopes to capitalise on the growing e-commerce market, particularly in the US, and says its software as a service is the second biggest after Oracle providing online retailers with suggestive search engines.