Horizon Technology notched up the biggest opening day gain in the history of the Irish stock market when its shares soared 156 per cent yesterday to €4.20 (£3.31), valuing the company at €245 million (£192 million). The shares peaked at €4.56 (£3.59) but drifted back in later trading.
But Horizon chief executive Mr Samir Naji has rejected suggestions that the flotation of the company at €1.64 (£1.29) per share was under-priced and said that the size of the premium reflected the fact that high-technology shares in Dublin and London are increasingly trading like their counterparts on the Nasdaq and Neuer Market where first-day premiums of this scale are not unusual.
The flotation of Horizon comes just 11 years after Mr Naji - son of an Egyptian father and Cork mother - founded the company with the help of a mortgage on his parents' home. The company, which still has its headquarters in Cork, has expanded rapidly and currently employs more than 230 people, with offices throughout Europe.
In the flotation, Mr Naji sold 4.8 million shares at the €1.64 (£1.29) offer price, while another Horizon director, Mr Charles Garvey, sold 600,000 shares at the same price. Mr Naji has sustained a paper loss of €12.3 million - almost £10 million - as a result of the decision to sell part of his shares at the flotation price.
But his residual stake of 34 million - more than 58 per cent of the total - is worth almost €143 million (£113 million) at last night's closing price of €4.20.
Apart from Mr Naji, the real winners in the flotation are the institutions who bought more than 16 per cent of Horizon in a private placing of 9.4 million shares a year ago at 78p (99 cents) per share. The institutions, who also bought 5.2 million shares, and Horizon employees, who bought more than 306,000 of the shares sold by Mr Naji and Mr Garvey at the €1.64 (£1.29) offer price, have been rewarded handsomely as well.
But some market sources felt that the size of the first day premium had been overdone and that Horizon and its brokers NCB had under-priced the share offering or else the market has pushed Horizon ahead to levels not justified by the fundamentals.
The shares were offered on a historic p/e of 23.9 but were on a p/e of more than 60 at last night's closing price - a multiple that some analysts said was more appropriate to specialist Internet and e-commerce companies.
But both Mr Naji and NCB's head of equities, Mr Jim O'Donovan, rejected suggestions that the share offer - which raised no money for the company - undervalued Horizon. Mr Naji said that other stock markets are moving to the type of first-day premia on Nasdaq where a share price doubling on its first day's trading is not uncommon.
"There is a growing understanding of technology stocks," said Mr Naji, who added that Horizon was moving increasingly towards its Internet and knowledge services business, with the computer distribution business increasingly playing a smaller part in the overall business.
There has been speculation that Horizon might sell off its distribution and concentrate on the more high-tech part of the business, but Mr Naji indicated that Horizon is in no rush to sell. "As long as it does not require money, we might just leave it there," he said.
Mr O'Donovan of NCB said that he had expected a very good premium for the shares and accepted that the 156 per cent gain was "very much the top end of what we expected".
"It was priced to ensure a good after-market but it was also boosted by the strength of the Internet and technology sector in the past few days. There was also unsatisfied demand at the offer price," he said, adding that there was demand yesterday from both institutional and retail investors. "The institutions are prepared to pay these sort of prices for a high-growth stock," he said.
The extraordinary rise in the Horizon share price on the first day certainly justifies the decision by Mr Naji to pull out of takeover talks with Eircom in October. Eircom had offered around £70 million for Horizon - less than half last night's value for the company on the stock market.
But the takeover talks collapsed, allegedly because of a lack of synergy between the two companies, although hard cash is also thought to have been a major factor in the disagreement between Mr Naji and Eircom.
