AAIG & Halo IPO

Hi Wally,

The IPO you are referring to is for HALO, a platform incubated under the AAIG banner and is now being spun out via a listing. I have read the prospectus and see many reasons to be concerned.  Your comments around AAIG are spot on, I have heard from a number of subscribers who invested in this company on a looming listing, and frankly, I think this is highly unlikely. They’ve lost about ~$10m each year for the last 5 years from what I can tell and remain unprofitable.

Now to HALO, the pro, it’s a good piece of software users seem to like. I’ve trialed it, it was okay but then again, I have a Bloomberg terminal.

Now for the cons…this could go on and on but I’ll keep it short….The incentive structure disadvantages shareholders, if it works, HALO management get a lot of the upside funded by shareholders. For example, they are raising ~$40m used to effectively buy growth, if they meet performance hurdles ($14.25m EBITDA) management get ~19m performance rights which is ridiculous.  The bulk of revenue from Halo has come from AAIG subscribers, I would think that well is now dry, further growth will be harder. They value it north of $175m fully diluted, it does ~10m revenue! Governance risk would be very, very high, in my opinion, the guys behind  Halo are all over the other AAIG businesses. It seems to me that AAIG shareholders have funded HALO yet they only hold ~30% of the stock with the remaining 70% owned by said guys. Think about that for a second,  Company A, which is highly unprofitable and survives by raising money, generally from their customers, funds company B’s product. When it’s built, Company A only ends up owning 30% of Company B, the guys behind company A own ~70% personally. Really makes your blood boil. Suffice to say, I have no interest.