UPDATED: IkeGPS shares fall further after listing at a discount
Shares of IkeGPS Group [NZX: IKE], which makes portable measuring devices, slid about 14 percent in their debut on the NZX, where investors are spoiled for choice among tech companies.
The shares fell as low as 90 cents, and recently traded at 95 cents compared to its initial public offer price of $1.10, valuing the company at $47.6 million. Wellington-based IkeGPS sold 22.7 million new shares, to raise $25 million in new capital to invest in marketing and sales as it shifts away from production development. Existing shareholders, which include Jenny Morel’s No 8 Ventures and business partner General Electric, withdrew plans to sell $6 million of shares into the float. There was no public pool.
The NZX is in the midst of a flurry of listings, including Gentrack Group, the airport and utility software company, and Serko, the travel booking software business, which both debuted in June. Gentrack [NZX: GTK] recently traded at $2.54, above its $2.40 IPO price, while Serko [NZX: SKO] was at 90 cents, having been sold in its IPO at $1.10 offer price. In the next month, Vista Entertainment, the cinema software and data analytics company, and Eroad, the logistics and transport data tracker, are set to join the bourse.
"There's been a number of these types of investments come to market, and there just isn't the demand for it," said Grant Williamson, director at Hamilton Hindin Greene, which took a small allotment on behalf of its investors. "Investors have also been looking to take some of the risk out of their portfolios." Still, "its only the first day, it's going to be on the market for a long time," he said.
IkeGPS is forecasting its net loss will widen 133 percent to $5.33 million this year, and extend further to a loss of $5.8 million in 2016, according to its prospectus. Forecast sales growth of a three-fold increase to $6.5 million this financial year, rising to $14.3 million in 2016 will be dented by expanding expenses, set to triple this year to $11.5 million and grow further to $19.6 million in 2016.
The company is chasing growth in the US market and will use the capital to transition from product development to focus on sales and marketing.
"Up until now we've done business on a lean organisation, now we are looking at scaling up the company and building a US foundation," chief executive Glenn Milnes said at the NZX launch in Wellington.
In IkeGPS's prospectus it said that even though the company has operated since April 2003, "it is only recently that Ike's current business model has been developed so investors should treat Ike as an early-stage growth company."
Milnes said the company elected not to seek a listing on the NZX's new market for start-ups and smaller, high-growth companies.
"We are going to be a very big company and the new market wasn't available to us," he said. "The timing was right for us."
GE, which Companies Office records show holds a 5.9 percent stake in the company, agreed to sell IkeGPS's electricity market asset management product as the GE-branded MapSight. The US market for the MapSight could be worth US$700 million, IkeGPS said in its prospectus. Its Spike measuring product, which employs laser, camera and software in a mobile phone will be targeted at the architecture, engineering and construction sectors.
"Ike's target markets are larges, its current penetration is low and the business is highly scalable due to a business model that features high gross margins and low marginal cost of sales," the company said.
IkeGPS developed the products with US Army Corps of Engineers, US intelligence agency developer IN-Q-Tel and software providers for electricity units. The company expects to ship 289 MapSight units this year, and a further 626 in 2016, while Spike unit shipped will rise to 2,533 this year and 2,712 the following year.
The company expects to grow its staff to 84 people by 2016, from 59 this year, of which almost two-thirds will be New Zealand-based while the rest will be in the US.