Why do Australian companies including Atlassian list in the US and not Australia?
It started in 2002 with a $10,000 credit card debt between two university friends in Sydney.
Today, Atlassian has a market capitalisation of about $US15 billion or $20 billion (based on 238.9 million shares outstanding and a June 29 share price of $US62.52).
The company employs more than 2500 staff around the world. It also boasts more than 89,000 clients, who are actively using collaborative software.
Known as Australia’s IT darling, Atlassian became a global success when its co-founders – Mike Cannon-Brookes and Scott Farquhar – decided to list the company on the NASDAQ, the tech-heavy index in the US.
The high-profile initial public offering (IPO) gave Atlassian a massive boost due to investor appetite and support for technology companies in the US.
In a number of interviews before and after the listing, Atlassian’s co-founders said the size and maturity of the US markets is one of the main reasons the company listed offshore instead of Australia.
Australia represents less than 3% of global market capitalisation
While Australia has a mature investment environment, it represents a small fraction – less than 3% – of global equity market capitalisation.
And it’s this size that serves as one of the limiting factors for companies seeking investment in the domestic market.
Compared with the US, which boasts several stock exchanges, a healthy venture capital market and massive fund managers with trillions of dollars to invest, Australia has not reached that level of investment attraction yet, particularly for pure IT companies such as Atlassian.
In this regard, Atlassian is not alone in seeking to list offshore.
Other Australian companies in other sectors, particularly biotech and healthcare, are also eyeing to list in the US. And, of course, some Australian companies have dual listing on the ASX and the US market.
Australian companies with dual listing in Australia and the US include Benitec Biopharma, BHP Billiton, Genetic Technologies, Immuron, James Hardie Industries, Mesoblast, Kazia Therapeutics, Prana Biotechnology, Immutep and Sundance Energy Australia.
Share price performance
Atlassian listed in the US at $US27.50 in December 2015. In June this year it traded close to $US67, which is a hefty gain for those who were able to participate in the IPO and hold onto the shares.
Given the company’s growth – new acquisitions, new products and a growing list of clients across the globe – it looks as if Atlassian is set for more solid performance in the coming years.
What does it do?
Known as a pure IT company, Atlassian makes software that allows teams of people to collaborate more efficiently to deliver products to the market.
Its products are used by software developers – from small to large groups of users who work on complex projects.
Have Australian investors missed out?
The decision to list in the US didn’t go down well with some investor groups in the domestic market.
Along with many retail investors, they felt they had been left out and had missed a great opportunity to invest in an Australian-grown and owned IT company.
Some market observers were also critical of Atlassian’s decision to list in the US, saying it deprived the domestic market of a pure technology company.
This group also said the fact that Atlassian listed in the US robbed the local market of a boost and incentive to grow and nurture Australian companies on the sole strength of the domestic market.
Despite all the criticisms lobbed against Atlassian, the company is now well on its way to becoming one of the world’s technology giants.
While it is not in the same league as Microsoft, Apple, Oracle or IBM yet, it has built a solid reputation as a growth-oriented company.
Aside from existing investors, Atlassian is still attracting major fund managers and venture capital groups that are interested in building equity in the company.
Where does this leave Australian investors?
While many Australian retail investors have missed out on Atlassian’s IPO, there are still opportunities to buy Atlassian shares on the NASDAQ, where it trades under the symbol TEAM.
Using online trading platforms, retail investors can now buy and sell Atlassian shares in the US just as easily and cheaply as if they were listed on the ASX.