Fund managers were this week struggling to recall the last time they had received an IPO prospectus that didn't include forecasts. One told Stock Takes it might have been during the Dotcom bubble, another had never seen it before.
Hopefully Orion, which expects to list on November 26, isn't setting a precedent that future issuers will increasingly follow.
Chairman Andrew Ferrier says the board spent a lot of time debating whether to include forecasts and leaving them out was "the prudent thing to do".
The former Fonterra boss knows his stuff and may well be right.
However, Orion - whose IPO will value the company at up to $915 million and raise as much as $150 million in new capital - is asking prospective investors to take quite a leap of faith, particularly given the 270 per cent increase in half-year losses, to $14.8 million, the company has reported for the six months to September 30.
The firm says the increased loss is partly the result of an influx of new customers in the US - it signed up 15 last year - which has resulted in higher implementation costs.
Elbow grease
Nikko Asset Management New Zealand's head of equities, Stuart Williams, says Orion has provided a solid level of detail in the prospectus, which investors can use to form their own views on what the firm's future financial performance might look like.
"It just requires more work," he says.
But Williams says the lack of forecasts could have an impact on the final pricing of the offer, which will be set through a bookbuild process next week.
Orion unveiled an indicative price range of $4.30 to $5.70 a share on Tuesday.
"Not providing detailed forecasts creates a measure of uncertainty, which should mean a bit more of a discount," Williams says.
Roughly 17 per cent of Orion is being sold through the offer and chief executive and founder Ian McCrae will retain around 50 per cent of the firm following the IPO.
Much of the proceeds of the float will be used to beef up the firm's research and development, and implementation capabilities.
FMA okay
The Financial Markets Authority says securities regulations allow companies not to include prospective financial information in an IPO prospectus if it could mislead or deceive investors.
"In line with our standard practice for IPOs, we engaged with the issuer [Orion] on this offer in the lead up to registration," says the FMA's director of primary markets and investor resources Simone Robbers. "In this case we focused on ensuring the reasons for not including prospective information were made clear and that the offer documents included the best possible available information for prospective investors."
She says the decision not to include forecasts is for the directors to make, not the regulator.
"For any investment, and particularly with initial public offerings, investors need to read all the information provided carefully to ensure they are comfortable with the descriptions of the business and the prospects of the company they are considering investing in."
Growth potential
It's a bit of a shame that the forecast issue - and the recent increase in losses - has dominated media coverage following the prospectus' registration this week.
Orion, founded in 1993, certainly has immense growth potential.
The company has achieved compound annual revenue growth of 26 per cent over the last decade to reach $153 million in its last financial year.
Orion says it has a substantial opportunity in the US insurance market. Its Healthier Populations software - which allows patient information to be shared between health professionals, regardless of where it is collected - aims to reduce healthcare costs by keeping patients healthy and out of hospital, which saves insurers money.
Orion has recently signed up Blue Shield California and Pennsylvania-based Highmark, two major US health "payers", and says it expects to announce a couple more contracts in that space in the near future.
Powerful performance
The power companies involved in the Government's asset sale programme were never expected to be growth stocks.
But that's exactly what Meridian Energy, which floated last October, is shaping up to be.
The electricity firm's instalment receipts have gained more than 61 per cent this year, making them the best-performing NZX50 stock.
Meridian fattened its dividend, hinted at a possible return of capital and beat prospectus forecasts when it reported its annual result in August.
National's decisive victory in last month's election - which swept away regulatory risk associated with opposition policies - has been another reason for the share price gains.
Another likely contributor to the stock price growth has been speculation that Meridian, as well as Mighty River Power, might enter the MSCI Global Equity Indexes next month.
This would mean funds that track those indexes would have to buy the companies' stock.
Shares in Genesis Energy have gained 28 per cent since its April float, and Mighty River shares have risen 34 per cent this year.
Throw in solid dividend yields and things are looking good for investors who took part in the state asset IPOs.
