Bike Exchange raising $3.1m with plans to delist after an uphill battle on the ASX

Three years after listing on the ASX via a $76 million float, online bicycle marketplace Bike Exchange (ASX: BEX) has announced plans to raise $3.17 million ahead of removing itself from the stock exchange after struggling to gain traction with retail investors as a public company.

The Melbourne-based Bike Exchange, which was founded in 2007 by Sam Salter and Jason Wyatt as a classifieds business for the cycling sector, has failed to turn a profit as a listed company - although its recent fortunes appear to be turning with the latest half-year result building on momentum that chairman Dominic O’Hanlon says has been evident over six consecutive quarters.

However, the company blames thin trading volumes for a decimation of its market value from a high of more than $80 million shortly after its 2021 listing to $9.3 million based on the latest share price of 62c.

While Bike Exchange shares were issued at 26c in the IPO, the company consolidated its shares on issue in December last year at the rate of one share for every 100 shares held.

“Notwithstanding the company’s ASX listing, trading in the company’s shares has been relatively illiquid which has contributed to a low share price,” says Bike Exchange in an announcement accompanying the capital raising today.

“The board believes that the current spread of shareholders does not maintain an orderly and liquid market for trading in BEX shares.”

The proposed capital raising comprises the placement of new shares at 50c each to sophisticated and professional investors to raise about $680,000, in addition to a non-renounceable pro-rata entitlement offer to shareholders on the basis of one new share for every three existing shares held to raise a further $2.49 million.

Under the delisting proposal, Bike Exchange has offered existing shareholders the opportunity to stay along for the ride, although minority shareholders with less than a marketable parcel will have an option to sell ahead of delisting.

Proceeds from the capital raising will provide working capital and fund technology platform development, as well as finance the buyback of shares from minority shareholders.

About 72 per cent of the issued capital of Bike Exchange is held by the company’s top 20 shareholders, with the top four holding 43 per cent which the company says has exacerbated its low trading volumes.

The company plans to engage a ‘third-party private share trading platform service’ to facilitate off-market trading of its shares for shareholders who choose to remain on the register after delisting.

Bike Exchange has operations in Australia, New Zealand, North America and Europe with 2023 heralded as a transformational year by the company after it closed down its ‘capital intensive’ Kitzuma Door-to-Door delivery of bikes in North America and closed its Columbia-based bike retail stores.

“Our new AI Consumer Marketplace Platform is delivering immediate results with a superior customer experience and substantially better conversion rates for Bike Exchange,” CEO Ryan McMillan told shareholders at the company’s annual general meeting in November.

“We expect this platform to be rolled out across our seven key markets by the end of Q3 FY24.”

Bike Exchange today announced a 50 per cent lift in revenue for the December half to $3.9 million, leading to a loss of $1.99 million for the period. This is down from a loss of $11.87 million a year earlier.

“Bike Exchange commences Q3 2024 with strong momentum, having delivered six consecutive quarters of improved marketplace health metrics and an AI storefront that is already delivering improved e-commerce performance in its largest market, Europe,” says O’Hanlon in the notes accompanying today’s profit result.

“Following the rollout of the AI storefront to all verticals, the Bike Exchange Marketplace and e-commerce teams will focus on execution, and optimisation within the new technology, for the remainder of H2.”

Bike Exchange notes the benefits of delisting from the ASX include a reduction of administrative and compliance costs totalling $364,000 a year.

“A significant portion of the company’s management time is currently being dedicated to time-intensive matters relating to the company’s ASX listing,” says the company.

“A delisting would allow management to spend more time on other value-add matters for the benefit of the company and its shareholders.”

The closing date for the buyback of non-marketable parcels of Bike Exchange shares is 17 April 2024. Bike Exchange is yet to announce a date for its ASX delisting.