Openn Negotiation calls administrators a week after $1.3m bid for prop-tech Proffer Group

Openn Negotiation calls administrators a week after $1.3m bid for prop-tech Proffer Group

Photo credit: Tom Rumble, via Unsplash

A week after announcing plans to acquire prop-tech Proffer Group for $1.33 million, real estate platform Openn Negotiation (ASX: OPN) has been placed into voluntary administration in a bid to potentially spare the embattled company from liquidation.

The Perth-based Openn, a real estate platform that is used by some of Australia’s largest property agencies, says it has been forced to act after failing to raise the fresh capital needed to continue operating as a going concern.

The announcement on 6 May that Openn was planning to acquire Sydney’s Proffer Group was accompanied by plans for a $2.5 million private share placement to fund the acquisition and to provide working capital for the merged entity.

But the problems began to emerge for Openn by the end of last week.

The company, which sought a voluntary suspension of its shares on 3 May ahead of the acquisition announcement, asked for an extension of that suspension on 10 May after revealing it had not concluded the proposed capital raising. The funding round was being managed by CPS Capital which was looking to secure the capital via a placement with high-net-worth investors.

Openn today has advised that Richard Tucker and John Bumbak, of KordaMentha, have been appointed administrators to the company to “maximise the chances of continuing in existence”.

If this isn’t achievable, Openn says the voluntary administration will result in “a better return for the creditors and members of the company than would result from an immediate winding up of the company”.

“The current situation has largely been precipitated by the failure of the company to successfully raise the required funds to continue operations as a going concern,” says Openn in its statement to the ASX.

“The administrators will be undertaking an urgent assessment of the company. Their objective will be to work closely with management to determine the appropriate strategy for the company.”

The most recent update from the company revealed that Openn had just $208,000 in cash at the end of March and that it had burned through $2.475 million in cash for the first nine months of FY24.

Operating costs swamped a promising jump in revenue from subscriptions for the Openn platform in the March quarter to $192,000, taking total receipts for the nine months to March to $486,000.

The company, which is led by co-founder Peter Gibbons, reported that subscriber growth in Australia and New Zealand had soared by 146 per cent year-over-year by the end of March, driven by a 266 per cent increase in new subscribers compared to the December quarter of FY24.

Openn, which had a market capitalisation of $6.7 million prior to its share suspension on the ASX, currently has almost 150,000 users and more than 4,000 real estate agents on its books who have facilitated combined sales worth more than $10 billion.

“The business's continued emphasis on generating recurring revenue through subscription-based fee structures is yielding positive results, as evidenced by increased user engagement,” the company said at the time.

“Comparing March 2023 to March 2024, the number of listings per subscriber has surged by 45 per cent, indicating enhanced usability and value for users.”

Openn posted a net loss of $2.08 million for the December half, down from a $5,66 million loss a year earlier. But revenue for the first six months of FY24 was just over $313,000 – down from about $338,000 in the previous corresponding period.

Openn, which was founded in 2016 and listed on the ASX in 2021, operates a cloud-based software platform that supports real estate agents in selling property online. The platform provides digital contracting and automated communication tools that the company says enhances a property transaction by offering users greater transparency.

Proffer Group’s platform allows buyers to research, value and submit offers for residential property in Australia. Users can search for property by address or suburb and can access a detailed property profile for properties using a range of valuation methods from third-party providers.

The acquisition of Proffer was aimed at expanding Openn’s existing technology by generating qualified buyer and vendor leads for agents from previously unlisted properties.

Since listing in 2021, Openn has been looking to expand its operations internationally, with the North American market a key focus. The company has since forged a partnership with the Canadian Real Estate Association, and secured an integration with Realtor.ca , the largest real estate portal in Canada.

In its March-quarter update, Openn revealed it was exploring a suitable funding pathway to ensure its financial stability, while also evaluating acquisitions that were both complementary and scalable in the prop-tech field.

The fate of its planned buyout of Proffer Group is uncertain while the company remains in administration.

The company’s future now rests with creditors who will be invited to attend their first meeting within the next week before voting on any rescue proposals that may be put forward at their second meeting, on a date yet to be fixed.

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