James Thomson Editor

James Thomson is the editor of BRW. Previously he was editor and publisher of SmartCompany and a senior editor at Business Spectator. He writes regularly on Australia's wealthiest entrepreneurs and has deep expertise in small business and the mid market.

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263 million reasons Matt Barrie was right to knock back a Freelancer takeover – and why the hard work’s just starting

Published 18 November 2013 08:12, Updated 19 November 2013 15:03

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263 million reasons Matt Barrie was right to knock back a Freelancer takeover – and why the hard work’s just starting

Matt Barrie’s decision to reject Recruitco’s takeover offer and list Freelancer on the ASX has been entirely vindicated. Photo: Christopher Pearce

You know that feeling of satisfaction you get when you’re really, really, really, really right?

Matt Barrie, founder and executive chair of Freelancer could have been forgiven for basking in that feeling over the weekend after the company’s impressive debut. He’s already on the BRW Young Rich list, ranked seventh with a fortune of $185 million.

After listing at just 50c, shares in the company leapt to $2.50 on listing on Friday morning. It was all downhill from there though and the stock closed at $1.60. Still, that’s a 220 per cent rise on day one – Barrie would have surely taken that at the start of the day.

More importantly, the closing price gave Freelancer a market capitalisation of $697 million, well above the $434 million takeover bid that Barrie rejected in September from Japanese group Recruitco. That’s a $263 million gap.

Many had questioned why Barrie would knock back the offer and then plan an IPO that valued the business at just $218 million, but the Sydney entrepreneur stood firm in his belief the growth story of the business would eventually be proven.

His personal stake is now worth $320 million, rocketing him onto the main BRW Rich 200 list, providing the company’s share price holds up.

And therein lies the next challenge – making good on the growth story.

Freelancer earned money for the first time in 2012-13, and forecast $18.3 million in revenue this 2013-14, with earnings before interest, tax, depreciation and amortisation of $1.6 million. Net profit is forecast at just $471,000.

That means on current prices, Freelancer is on an earnings multiple of 1479 times – which suggests some serious blue sky.

Of course, massive earnings multiples aren’t unusual in the tech sector, and the other ASX-listed tech group that has received amazing support this year – cloud accounting software group Xero, which has seen it’s share price rise more than six-fold in the past 12 months – isn’t even profitable yet.

What Freelancer does have going for it is a global outlook and an opportunity – and a reasonable one – to build a dominant position in the outsourcing sector, which remains very much in its infancy.

If it can do that, the financials should improve and, Barrie will be hoping, relatively quickly.

He and Freelancer are off to a great start, with the momentum at their backs. He’s been vindicated for rejecting a juicy takeover bid, he’s got big-name shareholders such as SEEK founders Paul and Andrew Bassat on board and he’s worth $320 million.

The hard work doesn’t exactly begin now – Barrie’s been building this company since 2009.

But being listed is a whole new kettle of fish and a big adventure is under way.

UPDATE: Shares in Freelancer were up 28 per cent to $1.95 in trade on Monday morning.

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