The latest junior explorer to transform itself by offering a 'backdoor' listing to a non-mining firm hopes to disrupt the housing market by offering an alternative to traditional real estate agents.
Backdoor listings, or reverse takeovers, have become something of a fad for resource companies over the past two years as investor appetite for highly speculative explorers evaporated.
MinRex Resources, a junior gold explorer with its main project area east of Geraldton in Western Australia and another in Tasmania, had the misfortune of timing its own IPO for November 2011, when the signs were already mounting that the peak in the mining boom had passed.
“MinRex has been looking at various other corporate opportunities for the last few years,” executive director Simon Durack says in an interview.
While some options were in the mining sector, Durack was finally convinced by the opportunity to take a slice of the transaction costs in the real estate market by undercutting agents.
Estate agents across Australia make combined commissions of $6 billion every year, an industry conference was told in September -- making real estate ripe for the type of digital disruption that has swept through many parts of the economy.
The reverse takeover was approved by shareholders this week and involves a capital raising of $5 million to $7 million which will be used to finalise the acquisition of Hello Real Estate Ltd, which will then list on the ASX in January.
Hello provides purely online real estate services for a fixed fee, rather than the percentage-based commission used by real estate agents.
“Hello has an interesting model and will be a real disruptor to the traditional way agents go about selling and purchasing properties,” Durack says.
The service covers building inspection and valuation, web listings, negotiation, conveyancing and settlement and could cost around half the current fees charged by agents. Instead of verbal negotiations, would-be buyers need to log on to the platform and lodge a written offer, which the vendor will then discuss with a Hello agent or “mentor”.
Hello says that on a million-dollar house sale, it charges a fixed rate of $9,990, compared with a real estate agent who would charge a 2.2 per cent commission or $22,000. The fixed rate is lower for regional areas.
Durack says MinRex has not been active in its exploration tenements for the past year and will eventually explore options to sell or close them.
There have been more than 20 backdoor listings on the ASX this year, compared with 14 last year, and most of the new companies have been in property or technology.
For Hello, which initially considered its own capital raising, the attraction was to find a shell company that already had the experience and background of operating as a public company. MinRex “has cash, it wasn’t an empty shell, and they had a good reputation,” says Hello founder Phil Horan.
The prospectus does warn that incumbents, including agents or industry associations, could fight back aggressively against Hello’s disruption plans, using price or innovation and access to significantly greater resources.