The ink is barely dry on the announcement of Orion Health's up to $150 million sharemarket listing and fund managers are already talking down the offer's price - even though it is yet to be revealed.
After years of speculation, the Auckland developer of software systems used in hospitals yesterday confirmed it is aiming to float on the NZX and Australia's ASX late next month.
The company is looking to raise between $120 million and $150 million through its initial public offer, which will fund growth in key markets such as the United States.
An entity associated with chief executive Ian McCrae, who founded Orion in 1993 and remains the majority shareholder, is planning to sell $5 million of shares through the offer.
Valuations of up to $900 million have been bandied about for Orion, whose investors also include Milford Asset Management, Pioneer Capital and Sir Stephen Tindall's K1W1 fund.
Salt Funds Management managing director Paul Harrison said appetite for the listing would depend on the offer's pricing and the company's growth forecasts.
"I suspect the price expectations of the [Orion] vendors were set when companies like Xero were trading at $45 and the market was prepared to pay for blue sky and then some," Harrison said.
Shares in accounting software developer Xero have fallen from a record $45.99 in March to last night's close of $15.90 after a global sell-off of growth-focused stocks and recent market disappointment about the company's progress in the US.
A price range for the Orion IPO will be included in the prospectus, which is expected to be available before the end of this month. The final pricing will be set through a bookbuild with institutional investors next month.
Harrison said his firm would resist over-pricing.
"We won't be paying over the top for growth expectations that are in our view unrealistic," he said.
Another fund manager, who did not want to be named, said price expectations for recent technology IPOs had been too high and resistance to Orion's pricing could be expected.
An investment banking source said there was strong institutional appetite for the IPO internationally and locally, and solid retail demand for the offer was also expected.
Orion posted revenue of $153 million in its last financial year and is aiming for $1 billion in revenue by 2020.
Deutsche Craigs and First NZ Capital are joint lead managers of the offer.
Q&A - Growth push
Q: What does Orion Health do?
A: Its software allows patient information to be shared between departments within a hospital and between multiple facilities within an overall health system. Much of Orion's future growth is expected to come from its Healthier Populations division, whose technology allows patient information to be shared between health professionals, regardless of where it is collected.
Q: Why does the company want to raise capital?
A: The company is preparing for a major growth push. Yesterday, Orion said cash raised through the IPO will be used to boost its research and development capabilities, grow its customer base and provide additional financial liquidity.
Q: How big is Orion?
A: The firm has 1100 staff and customers and offices located in around 30 countries. About 90 per cent of revenue is from overseas markets including the US, Canada, UK, Australia and Middle East.