Plunge in ikeGPS shares on debut raises questions about prospects of similar tech firms.

IkeGPS shares plunged after its stock exchange debut yesterday, suggesting investor appetite for growth-focused, loss-making technology companies is continuing to wane and raising questions about the prospects for similar firms looking to go public on the NZX.

Shares in the Wellington-based developer of geo-location and measurement devices were issued in the initial public offering (IPO) at $1.10 and promptly fell more than 18 per cent to 90c, before recovering some ground to close down 10 per cent at 99c last night.

IkeGPS' listing followed a similarly shaky IPO by corporate travel booking software provider Serko last month. Serko shares closed down 4c at a record low of 88c last night, 20 per cent below their $1.10 issue price.

The travel software developer and ikeGPS are expecting ongoing losses as they chase growth.


Gentrack, a profitable and well-established provider of software used by utilities and airports, also listed last month and its shares have gained about 5 per cent from the issue price to close at $2.54 last night.

Until this year the market was taking a bullish approach to unprofitable firms with big promises of future profit, pushing the valuations of those such as online accounting systems provider Xero and biotech outfit Pacific Edge to record levels.

But sentiment has taken a turn for the worse in recent months, wiping millions - billions in Xero's case - off the market capitalisations of growth-focused NZX-listed businesses.

"The market was paying for blue sky three months ago, but it's not paying for blue sky any more," said Salt Funds Management managing director Paul Harrison.

"In fact the market has become quite impatient on the existing [growth] stocks, let alone trying to list a company like ike."

The $1.10 offer price valued ikeGPS, which expects a $5.3 million loss in the year to next March, at $55 million.

"From our point of view there were some pretty heroic assumptions you had to make to get to the [IPO] valuation," Harrison said of ikeGPS.

IkeGPS chief executive Glenn Milnes said the company, which raised $25 million in new capital through its listing, was focused on its long-term growth plans rather than a short-term drop in the stock price.

"I think if we start hitting some of our milestones ... the share price will reflect that," Milnes said.

Milford Asset Management executive director Brian Gaynor said the Serko and ikeGPS IPOs would heighten investor scepticism about future technology listings and there would probably be fewer NZX floats this year than previously expected.

Software developers Vista Group and Eroad are expected to list next month, while tech firms tipped to be in the IPO pipeline include Orion Health, Wherescape and TripleJump.