Tech

Can this tech IPO restore confidence in new floats?

Wisetech rallies 8% on ASX debut
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Wisetech rallies 8% on ASX debut

Even as many technology plays are struggling to keep their share prices over their initial public offering (IPO) price, Australia's WiseTech Global on Monday jumped on its debut on the Australian Securities Exchange, sending its market value cracking past the 1 billion Australian dollar ($750 million) mark.

WiseTech, which provides technology to logistics companies, offered shares at A$3.35 a share. The company raised approximately A$168 million, with over 50 million shares offered and suggesting an initial market value of around A$974 million. The stock began trading at midday local time at A$3.41 per share, a premium to its IPO price, climbing as much as 14 percent even as the broader ASX 200 index ended down 0.12 percent.

The solid debut came despite investors turning cautious about new floats.

PhilipAlexander, executive director at Jacanda Capital, noted that investors "have either been stung or they have seen other retail investors get stung." He told CNBC's "Squawk Box" that WiseTech is a clear standout because it's profitable, global and very large.

A man looks at the main board of the Australian Securities Exchange ASX.
Daniel Munoz | Getty Images

That's in contrast to the many smaller, less profitable companies going public too quickly, due to a combination of Australia's lack of an active venture capital market until recently and companies starving for cash, he said.

"Being on the ASX gives them a validation to the retail investors that, perhaps, they do not warrant," he added.

Unlike these small players, WiseTech is already looking forward to profit.

For the six months ended 31 December, 2015, WiseTech had a total revenue of A$48.59 million, with net profit of A$3.12 million.

It's not too shabby for a company that CEO Richard White founded in 1994 from his basement in Sydney's suburban Newtown, with several colleagues and a credit card.

White owns a 50 percent stake in the company in his own name and through RealWise Holdings, where he is a majority shareholder.


A man monitors trading on the electronic share board at the Australian Stock Exchange in Sydney.
Australia's total payout ratio is below the global average of 92 percent: Goldman

Following the successful IPO, White said his company's growth plans are shaped by the need to provide technology to logistics companies to improve their operations.

"We are trying to build the entire set of logistics components, particularly aimed at third party [companies] ... so that these organizations offer much higher levels of service at a reduced cost to their customers," he said.

The company is not without its critics. The Sydney Morning Herald reported a fund manager said the initial offer price of A$3.35 was too steep for local investors. The fund manager also commented that it was not immediately obvious how professional WiseTech's management was.

But White told CNBC's "Street Signs" that his management team has had a long time to become professional and had worked hard at developing and bringing talent to the company.

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