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Australian fintech company Halo Technologies is preparing to list later this month, aiming to raise up to $40 million at an issue price of $1.20 per share.

Halo operates in the global wealth management industry, assisting retail and wholesale investors to analyse and manage investments through software solutions.

Founded in 2017, the Sydney and Melbourne-based investment service has spent the last few years solidifying itself in the industry. With the Company currently operating across 30+ global exchanges, they have shifted their focus from predominantly Australian and US equities to international markets that are more difficult to access. This distinguishes Halo from other market participants as it is not an investor directed portfolio service (IDPS) provider like Hub24 Limited (ASX: HUB) and Netwealth Group Limited (ASX: NWL).

Funds raised from the IPO will enhance the functionality of the Group’s products, implement global marketing strategies, pursue future growth and open the door for potential acquisition opportunities.

Halo provides global market data, research tools, company analysis, portfolio analysis, thematic portfolios and tax reporting – which can be very attractive for investors that like to look deeper into the market. The Company charges subscription fees for its research and analytical tools. Fees can range from $2,499 per year to $3,499 per year, depending on the depth of features required.

Halo uses the clearing services of Interactive Brokers (IB) for share trading under an omnibus agreement. An Omnibus account is where Halo has only one account with Interactive Brokers, with Halo managing the sub-register of all clients. Normally each client would deal directly with IB operating under their custodial structure. The fee structure that was established for Halo clients trading Australian or International shares is $15 or .12% (including GST), whichever is greater. The Company also retains 50 bps for foreign currency conversions. Additionally, it will not offer to trade in Derivative or Futures products.

Fees are payable to Halo for the research shares in the clients portfolio. Fees payable are up to .80% of funds invested.

Halo has a Data Provision Agreement with FactSet to source its equities and market information, similar to a Bloomberg Terminal.

In May 2019, Halo Technologies acquired Macrovue Pty Limited (Macrovue), whose direct equities trading platform offered ‘themed investments’ to retail investors in Australia. At the heart of the Macrovue global research effort, the analyst team curates thematic portfolios, known as ‘vues’. In November 2020, Halo Technologies and Macrovue integrated their respective service offerings in the form of HALO Global v3.0. The integrated software solution provides a comprehensive suite of products to cater for clients, brokers and financial advisers that provide seamless, efficient and cost-competitive access to local and international equities markets.

Halo also has a 15.8% holding in Domacom (ASX:DCL), the shares of which are currently suspended from trading on ASX. The lifting of this suspension will depend on Domacom undertaking a successful capital raise to recapitalize. The value of the DCL investment is $3.7m.

It may be worth noting that upon completion of the IPO, certain existing shareholders – employees or directors with access to pre-IPO shareholdings – will have a voluntary escrow of 50% of their shares for the first 12 months. For anyone who might not know what this can mean – usually, successful IPOs have two years of escrow before directors or employees can sell their shares – with such a short period of time, there is a heightened chance of a sell-down by the owners once the Company is listed.

A key risk for Halo is that a large portion of revenue is derived from a small number of related parties, namely; The Australian Stock Report, APSEC Funds Management, Ascot Securities and ASR Wealth Advisers. Halo will need to diversify its client base to assist its growth.

As of 31 December 2021, Halo had 3,811 subscribers to their products, 3,843 clients who don’t subscribe to a Halo subscription product but utilise the trading interfaces (either via Macrovue or ASCOT Securities), and total funds on the Macrovue Omnibus Account Management System of $245 million. This has steadily grown from total funds of $140 million on 31 December 2020.

FY21 Pro Forma revenue was $10.54m, with net profit after tax of $1m. Assuming a minimum subscription of $35m at $1.20 per share, the market capitalisation of Halo will be $176m on a fully diluted basis.

The Company intends to expand its existing business into the offshore market, most notably the United Kingdom and the US. It will do this through a combination of acquisitions and organic growth.