CORRECTED-UPDATE 2-Australia's Freelancer soars on debut as investors pile into outsourcing

Fri Nov 15, 2013 2:39am EST

(Corrects year of loss to 2011 in 10th paragraph)

By Maggie Lu Yueyang

SYDNEY Nov 15 (Reuters) - Australian jobs portal Freelancer Ltd soared up to 400 percent on its debut on Friday as investors scrambled to own shares in one of the few established companies in the rapidly growing Internet outsourcing market.

The world's biggest freelancing and outsourcing marketplace by user numbers briefly touched a market capitalisation of A$1 billion ($932.35 million) as it began trading on the Australian stock exchange after its A$17.55 million IPO.

Zillow Inc backer Caledonia Investments, Facebook Inc founding investor Joel Sng and Seek Ltd founder Andrew Bassat were among the new shareholders willing to put their money behind the small, Sydney-based company.

"Online staffing has been a major growth trend over the past few years. Freelancer.com is an important part of that emerging sector," said Rod Hore, executive director at recruitment industry advisor HHMC Australia.

"Freelancer.com has worked very hard to position itself globally, not just in Australia."

Founded only four years ago, Freelancer matches employers and freelancers around the world for tasks such as data entry, design and accounting. It has almost 9.5 million users from 247 countries and more than 5 million projects posted, with clients paying a fee once a job is filled.

The global online staffing market cracked the $1 billion milestone in 2012 and will grow to $5 billion by 2018, according to San Francisco-based Staffing Industry Analysts.

But there are still relatively few established players in the industry. Freelancer's biggest rivals include U.S. firm Elance, which this week announced a "strategic partnership" with IBM Corp to link app developers with talent providers around the world. [ID: nMKWTk1R9a]

Such firms offer employers and job-seekers an alternative to more traditional job websites such as Monster Worldwide Inc and Seek, which operate more like classified ads platforms than vehicles for tendering job contracts.

But it is still very early days for Freelancer, which recovered from a net loss of A$476,000 in 2011 to post a net profit of A$728,000 last year. It expects revenue to grow 73 percent to A$18.3 million this year, for a net profit after tax of A$819,000 excluding IPO costs.

"The company plans to continue reinvesting strategically to achieve growth, which may result in a period of minimal operating profits," company founder Matt Barrie, an IT engineer, said in the prospectus.

Barrie holds 46 percent of the business, a stake worth about A$321 million after Friday's strong listing. Investment fund Startive Capital owns another 39 percent.

STRONG DEBUT

Freelancer sold 35.1 million new shares or only 8.1 percent of the company in the initial public offering, which was underwritten by Sydney-based advisory firm KTM Capital Ltd.

The stock was offered at A$0.50 per share and closed at A$1.60, valuing the firm at A$697.6 million.

"On the face, the price is telling us that this float is underpriced," CMC Markets strategist Michael McCarthy said.

"But because they only sold a small amount of the 436 million shares, that's not a problem for them. What they've essentially done is establish a market value of this company."

The new market capitalisation appears to justify Barrie's rejection of several attempts to buy the company, including a $400 million approach from Japanese recruitment firm Recruit Holdings Co.

But the company now needs to live up to the market's high expectations, said Rivkin Securities director Shannon Rivkin.

"This has been valued at pretty silly numbers right now and it's a great story, but a lot of good things need to happen for it to be worth anywhere near the current price," he said.

The offer capitalised on a revival in the Australian IPO market and strong interest in non-resources stocks as the country's mining investment boom wanes.

Australia's IPO market has picked up with more than $1 billion raised in the first three quarters of 2013 compared with $227 million over the same period a year earlier. ($1 = 1.0726 Australian dollars)

(Additional reporting by Thuy Ong and Jackie Range; Editing by Stephen Coates)

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