SLI Systems plunges to lowest since listing as investors look to next round of IPOs
Shares of SLI Systems [NZX: SLI], the search engine software developer, dropped to a record-low as investors brace for the next round of growth-orientated stocks as the pipeline of fresh listings gathers pace.
The stock fell 7.4 percent to $1.25 and has more than halved its value since it January record of $2.85, though it's still above the $1.50 sale price in its May 2013 initial public offer. The shares are rated a 'buy' based on two analysts surveyed by Reuters, with a median price target of $2.47.
The local stock market is experiencing a flurry of listings which is spoiling investors for choice after it got a shot in the arm from the government's partial privatisation last year, and the recent listings of software developers Gentrack Group [NZX: GTK] and Serko [NZX: SKO] have only added to tech investments available. Next week, IkeGPS Group, which sells a range of portable measuring devices, plans to list while Vista Entertainment, the cinema software and data analytics company, is due in August, adding to the list of tech-based stocks on offer to investors.
Growth-orientated stocks have come in vogue since the market success of Xero [NZX: XRO] and Diligent Board Member Services [NZX: DIL] in recent years. Still, some of those stocks have fallen out of favour after making big gains in the first quarter of the year as investors question their high valuations relative to earnings, said Paul Harrison, who helps manage $650 million of equities and property holdings for Salt Funds Management.
"These stocks have been supported by retail investors, and retail investors are looking at some of the new IPOs," Harrison said. "There's more choice but also I think people some of these stocks were too highly priced to start with and there was a bit of excitement and frenzy around it and now there's a little bit of a hangover from the excitement around these stocks which has clearly come off.
"The stocks that have lots of blue sky in them are suffering after struggling to convince people that the blue sky is there at the moment," Harrison said.
Accounting software firm Xero rose 1.2 percent to $26 and has dropped 43 percent from its March high of $45.99. Pacific Edge [NZX: PEB], the Dunedin-based biotech company, was unchanged at 75 cents, less than half of its February high of $1.76. Diligent slipped 1.2 percent $4.11, and is 41 percent below its June 2013 high of $7.06.
Outside the NZX 50 Index Wynyard Group [NZX: WYN], the security software company, was unchanged at $2.09, NZAX-listed GeoOp [NZAX: GEO], whose software allows mobile businesses such as builders to manage their workforce, rose 7.1 percent to 78 cents, below its $2.40 debut in October last year.