In an IPO slated to list on 18 March 2022, Equity Story Group (proposed ASX code: EQS) is looking to raise $4.5 million to fund their expansion in the burgeoning share market education and investment advice space, coming up against industry stalwarts like Eureka Report, Switzer, Halo Technologies, and Motley Fool. Equity Story is differentiating its product by avoiding the share trading platform market and relying on a more simple advice model of daily and weekly podcasts.
The market for do-it-yourself share trading platforms (Superhero, Selfwealth, Stack etc.) have raced to the bottom on brokerage pricing, effectively destroying profit margins for all and losing a whole lot of money in the process. Equity Story, however, is trying to differentiate their product by offering some stock analysis software using plug-ins from data vendors such as Refinitive and offering regular podcasts to try and engage with their audience.
Equity Story’s value proposition is to communicate to the clients multiple times a day on either just the Australian market ($1,597 for a 12 month subscription) or both the Australian and US markets ($2,597). In addition, Equity Story offers a one-day education workshop course for $1,997 to teach clients how to time their trades on the market.
The Company also founded a wholly-owned funds management business launched in September 2020, known as the Equity Story Growth Fund; it currently holds over $5 million in funds under management. The Fund is benchmarked against the Barclay Hedge Fund Index and charges a management fee of 2.2% pa and a six-monthly Performance Fee of 22% (incl GST) of returns which exceeds the Benchmark return.
Within the last few years, there has been heightened demand from investors seeking general advice and commentary on stocks and trading strategies. Australia’s independent investment research industry has been valued at approximately $235.9 million and is expected to grow significantly in the coming years as more Gen Z investors enter the market looking for advice. Between 2018 and 2020, 27% of new investors belonged to the 18-24 age group.
Non-executive Chairman, Ben Loiterton, said, “Investment by Australians in the stock market continues to grow, particularly from younger ‘next generation’ investors. Between 2018 and 2020, a quarter of active new investors trading on the ASX was in the 18 – 24 age group. This has driven growth in the demand for investment advice and education, providing unique opportunities for EQS’s business.”
Equity Story says they currently have 1,200 clients paying on average $1,700 per year each, generating them $2 million per annum. According to their Prospectus, the Company reported about $1.2 million revenue with a loss of $420,000 for the year ended 30 June 2021. The uplift in revenue since June 2021 has been the average monthly revenue per client rising from $100 per month to $140 per month.
In search of new clients, Equity Story intends to use their IPO funds predominantly on advertising and marketing, setting aside $1.8 million, which equates to roughly 40% of the funds from the targeted capital raise.
Doing so, Equity Story will be competing against a plethora of other market-based platforms putting their hopes on out-bidding each other via Google Ads and other digital marketing tactics. Advertising spending from the likes of Selfwealth (ASX: SWF), for example, has been $2.06 million for the first six months of the year, mirroring ad spending across the sector.
Seeking to monetise their mailing list of 40,000, Equity Story is hopeful they can pitch new products to their database going forward. According to their documents, “The key to EQS’s immediate future growth lies in deploying capital to drive more aggressive marketing activities in order to increase the Company’s subscriber base.”