NZ potato-tech company CropLogic drops 23pc on ASX debut
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Kiwi agtech play CropLogic’s ASX debut disappointed investors, finishing its first day down 23 per cent from its IPO price at 15.5c.
The company, which offers crop management technology-as-a-service focused, for now, on potato crops, raised its target $8 million during the IPO, selling 40 million shares at 20c each.
It’s another protege of troubled investor Powerhouse Ventures (ASX:PVL).
Powerhouse Ventures has a direct 14.87 per cent stake in CropLogic, with another 5.46 per cent owned via a ‘nominees’ shareholder structure.
The next largest shareholder is New Zealand government venture fund NZVIF Investments with 7.15 per cent.
Powerhouse Ventures has had a rough month.
It lost $7 million when it forced another of its ASX-listed investments, dysfunctional hydro power technology company Hydroworks, into liquidation; the founder and managing director abruptly quit; and it posting a $10.2 million full year loss.
CropLogic launched in 2010 and is ultimately an Internet of Things (IoT) company, with an initial focus on potato crops which are difficult to manage as they are, of course, underground.
It uses equipment, based on technology developed by the New Zealand Institute for Plant and Food Research, such as probes that collect data on soil temperature and moisture as well as aerial imagery help farmers to better manage crops.
But crop prediction and management is an extremely noisy and competitive space globally, as companies around the world are tapping into the use of connected devices to monitor all aspects of farming.
CropLogic CEO Jaime Cairns told Stockhead that it’s difficult to break through that noise, but they are relying on the fact that they have 30 years worth of government research into crop management behind them, as well as agronomists to back up the tech.
“If something goes wrong in field we’ve still got the fall back of the agronomists. It’s a full solution,” he said.
Further, the company’s strategy of growth via acquisition has raised some eyebrows.
Agronomy businesses tend to be highly localised and the market is fragmented. Analysts expressed concern to Stockhead that growth without acquisitions would be hard to come by.
CropLogic used a $2 million pre-IPO earlier this year to buy agronomy services company Professional Ag Services Inc in Washington State, USA.
Cairns says acquisitions of agronomy businesses with established client bases are a key part of the strategy to enter new market, and they are looking at doing the same in neighbouring states in the US as well as in Australia.
But he says an acquisition-based expansion strategy is an “expensive” route and they have plans to grow “organically” once they’ve grown roots in each market.