It’s nearly two years since Sydney-headquartered software firm Atlassian cemented its status as Australia’s pre-eminent technology business with its wildly successful IPO on the Nasdaq.
The company’s decision to bypass the ASX and list in the US caused some consternation at the time, but it remains difficult to fault. It is not uncommon for big international tech companies to list in the US rather than their home country – China’s Alibaba did it, it looks like Sweden’s Spotify will too.
Cannon-Brookes: don’t hold back technology
The government’s ‘societal contract’ is to manage technology transitions, not ignore them says Atlassian co-founder Mike Cannon-Brookes during AFR Business Summit in Sydney.
But for the best evidence that Atlassian made the right call, look no further than its share price, which quietly rose to its highest level since listing this week.
As this column was published, Atlassian’s market value was above $US9 billion ($11.3 billion), greater than some corporate icons including Qantas, the owner of the ASX itself, and News Corp.
Atlassian co-founders Scott Farqujar (left) and Mike Cannon-Brookes (right) at the Nasdaq listing in 2015: Shares in Australia’s biggest tech export hit a record this week. Photo: Trevor Collens
The latter is especially fitting since Atlassian, which makes a project management tool for developers called JIRA and other collaboration products for teams such as messaging service Stride, is arguably the most successful Aussie company on the world stage since Rupert Murdoch took his media company global.*
Atlassian’s billionaire co-CEOs Mike Cannon-Brookes and Scott Farquhar aren’t saints (their company has faced criticism in the past for a bro heavy culture – and it re-domiciled in the UK where tax rates are lower).
But they are viewed favourably since, unusually for corproate Australia, they run a large company that doesn’t rip off consumers in some way or extract resources from the environment. (Cannon-Brookes has been a prominent advocate for clean energy).
The solid performance of Atlassian on the Nasdaq highlights the conundrum that tech stocks continue to represent for Australia’s traditional investment landscape.
There is a thriving local tech scene – headlined by Atlassian and a string of promising startups backed by a resurgent venture capital industry underneath it.
But, as things stand, this thriving tech scene is not meaningfully represented on the nation’s stock exchange.
Of course, the stock exchange is not the economy.
But the lack of quality tech exposure on the ASX goes some way towards explaining why our benchmark index, the S&P ASX/200, has lagged other global markets in recent years. The main indices in the US, Japan, Germany and even Canada have higher weightings to tech stocks than we do.
For its part, the ASX is attempting to rectify this.
The idea of a dual listing of Atlassian’s stock on the ASX is talked about in finance industry circles. Whether Atlassian – which declined to comment – would even be up for that is an open question.
A precedent for this move would be ResMed, a $14 billion medical equipment maker founded in Australia (which probably doesn’t get the attention it deserves). Now headquartered in San Diego, it went public on the Nasdaq in 1995, and then established a secondary listing on the ASX in 1999.
The dual listing, it is argued, made it easier for ResMed’s Australian employees to cash out their stock, and for local investors to participate in the company’s growth story.
The ASX has also been pursuing a strategy of enticing smaller tech firms, both domestic and foreign, to list in Australia.
Last year, there were 40 new tech listings on the ASX. Yet the quality of these companies is heavily debated.
Big local fund managers, who typically come from the value school of investing (think Warren Buffet) were unlikely to pay up for Atlassian, which – like many tech companies – features surging revenue growth but relatively meagre profits.
But at the smaller end of the market, there are networks of high net worth investors willing to back speculative smaller companies. Historically focused on “strike it rich” mining stocks, a lot of this money is now making its way into small tech companies, with questionable results.
It would be unfair to dismiss tech on the ASX completely.
About a year after the Atlassian float, WiseTech Global, a well-regarded firm that makes logistics software, managed to raise $170 million on the local exchange. Its shares have performed well since then, and WiseTech is now a $2 billion plus company.
And many of the first generation of Australian internet businesses such as Seek and Carsales.com.au remain well-run and respected companies.
Yet the most successful tech company this country has produced in a generation remains absent from the local exchange.
At a time when many of our biggest companies are under attack from tech giants like Amazon, it feels like a missed opportunity.
*(News Corp now only houses Murdoch’s Australian businesses, and its global publishing assets; his bigger film and television assets live inside 21st Century Fox Group, which is valued at about $60 billion).