Aconex shares slip slightly on ASX debut

Aconex shares dip on their first day of ASX trading.

Sally Rose in The Australian Financial Review says Aconex’s “bold decision to downsize its initial public offer has been vindicated as the right call.” Despite lifting on its debut into a falling market, the stock quickly slipped below the offer price (see The Australian too).

Shares in the Melbourne-based SaaS construction collaboration vendor started trading at midday at Au$2, up 5% on the final offer price of Au$1.90, while the benchmark S&P / ASX 200 Index was trading down around 1% for the session. But by 12:45 AEDT the stock had settled around Au$1.87, just under the $1.90 offer price. It’s market capitalisation was then just under Au$300 million (£158m, US$247m, €200m). At close, the stock was trading at Au$1.80 (see ACX page), down 5% on the offer price.

Aconex co-founder and CEO Leigh Jasper agreed that this respectable-but-modest performance on listing indicates the deal would have likely sunk if the IPO had proceeded at the original premium: “I feel good about the decision to re-jig the deal. We responded to an increase in market volatility and I feel confident we got the right register.”

Rose reports UBS brokers’ views  that a first day lift of around 5% signals a “sweet spot” that shows a deal was appropriately priced – delivering immediate value to new investors, without short-changing the issuers.

In a SmartCompany interview, Jasper, who along with co-founder Rob Phillpot retains an 8% stake each in Aconex, says many of the company’s employees are also shareholders and stand to benefit from today’s listing. Without naming names, he was also excited about new investors: “They are great long-term investors who see long-term potential in the company,” he said.

Money raised will primarily be used as working capital to grow Aconex and invest in new products, sales and marketing. “We’re also looking at bolt-on acquisitions post-IPO,” Jasper said, pointing to cloud-based companies as possible targets (see also previous post).

Reaction

Having postponed and downsized the IPO, Aconex and its advisors seem to have been downplaying investor expectations of a big uptick upon flotation, and this caution appears to have been well-founded. After all, we are not talking about a profitable company here, but one whose directors felt an IPO was the timely thing to do in order to restructure the company’s finances and give it some working capital to expand and acquire.

I also think little can be read into the first part-day’s performance with under 200,000 shares traded within a market which fell 1.7% during the day (it is also worth remembering that 55.2% of shares remain in the hands of existing shareholders, including the co-founders, non-executive directors and executive management). And there has been some unease about the volume of IPOs on the ASX – few recent flotations have seen any significant growth; Aconex’s dip echoes the experience of other market entrants.

Aconex financial results 2014

As part of its reporting obligations, Aconex has now lodged various documents with the Australian Stock Exchange, and opened its own investor centre. Among the items posted is Aconex’s annual report and accounts for the year to 30 June 2014. This confirms annual revenues of Au$66.224m and a pre-tax loss of Au$3.216m.

Of these revenues, Australasia accounts for just under 48% of the total, with EMEA, the Americas and Asia accounting for 25%, 16% and 11% respectively. Most of the company’s profits are derived from Australasia and EMEA; the Americas operation has the highest operating costs and is not yet generating a net contribution. Revenues were up across all the key countries or regions where Aconex operates; after Australia (Au$31m), the highest single country revenues were earned in the UAE (Au$6m), the US (Au$5.8m), the UK (Au$4.8m – £2.5m) and Canada (Au$3.9m).