Another tech IPO may be some time
Out of the crop of the tech companies that listed on the NZX in 2014, one of the best performers would have to be Vista Group International, which provides cinema software. Since listing the company has delivered a compound annual growth rate of 29%.
So, it was interesting to read comments by Vista's co-founder Murray Holdaway on the drawbacks of being a listed company in the 2019 KPMG New Zealand CEO Outlook Report released this week.
"Murray notes that public listing can sometimes be a double-edged sword. While it provides access to capital for Vista's acquisitions and diversification, he has found the New Zealand share market sometimes constraining due to its focus on EBITDA. He compares this to the US, where analysts focus on revenue growth in their company valuations. "Vista has continued to achieve impressive growth since listing, but at times we haven't been able to take the same steps we did as a private company when short term earnings could be sacrificed for bigger growth" Murray said."
'Short term results at the expense of long term value', is one of three reasons why New Zealand CEOs are hesitant about the economic outlook, according to KPMG New Zealand CEO Godfrey Boyce in his introduction.
"For our listed companies, the share market appears to put more weight on delivering EBITDA (earnings before interest, tax, depreciation and amortisation) than a revenue growth story. As such, these organisations are generally not rewarded for a bold strategy that prioritises revenue growth but acknowledges profit may be delayed. This paradigm constrains the investment and innovation that's at the heart of long term, sustainable growth," Boyce writes.
The NZX in its interim results announcement on Tuesday noted that, in addition to the Napier Port IPO due later this month, it is aware of 'potential listings'. Whether any of these are in the tech sector remains to be seen, but comments such as those made by The Instillery CEO Mike Jenkins today, will not give the NZX heart.
The Instillery is merging with Origin IT to create an ICT business that will have more than $40 million in revenue and 200 staff. When asked by the NBR if it would look to list on the NZX, Jenkins replied: "It's not necessary at this point. We're well supported by a great board of directors and private funding and there's no shortage of potential for growth."
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