What: Shares of the world's largest crowdsourcing website, Freelancer Ltd (ASX: FLN), today entered a trading halt citing a "potential capital raising".
So what: Freelancer is a dynamic technology company which matches users who offer services, such as website design, engineering, writing etc., with businesses right around the world. Essentially, a business posts a project brief which is then reviewed by those offering the services before providing a quote.
Following its hotly anticipated initial public offering (IPO) on the ASX in late 2013, Freelancer shares subsequently fell to a low of 52 cents in November 2014.
However, last week Freelancer reported a 28.2% jump in total registered users and a 41% increase in net revenue, which saw the company's share price jump to $1.48.
It also reported its first positive operational cash flow. That means, for the first time its cash receipts from customers (i.e. users/businesses) exceeded its payments to suppliers and employees, and income taxes.
For young technology companies, it's not unusual to see a cash outflow during a reporting period, as it builds its employee base while revenues are discounted, so as to maintain an attractive value proposition for customers.
However, once a technology business like Freelancer begins to report strong cash inflow, profits can appear sooner than expected – although I'm not inferring Freelancer will post a profit anytime soon.
Now what: The details of the offer are unknown, but shares are expected to begin trading on Wednesday, August 5.
What is interesting from this announcement is that the company is seeking to raise capital at all. Indeed, the company is already arguably well-funded, with $31 million cash on its balance sheet.
It remains to be seen where Freelancer will spend the money, but – given its potential for growth – for now it almost certainly deserves to hold a spot on investors' watch lists.
