Irish software group Spectel has withdrawn its flotation and €46 million fundraising a matter of hours before its shares were due to begin trading after institutional investors failed to meet the valuation the group's board had put on the group.
Spectel finance director Mr Jonathan O'Connell was at pains to stress yesterday that the flotation had only been postponed until market conditions improved but industry sources said the last-minute withdrawal of the initial public offering (IPO) was a severe setback for the group, which develops software for the videoconferencing industry.
The postponement of the Spectel flotation is also a devastating setback for the Irish technology sector. Analysts take the view that if a profitable company like Spectel is unable to go to the market at what it believes is a fair valuation, the funding prospects for loss-making Irish software companies are very poor.
In a formal statement, Spectel chief executive Mr Gerard Moore said the group "will continue to actively pursue our acquisition strategy and will consider returning to the capital markets as and when market conditions improve". Despite yesterday's strong performance by the Nasdaq after good results from Cisco, market sources said it was likely to be some considerable time before Spectel even contemplated reviving its flotation plans.
Stock market conditions were hardly ideal even when Spectel announced details of the flotation two weeks ago. Since then, the technology and telecoms sectors have taken a further battering with the Nasdaq in New York and Techmark market in London both down more than 10 per cent in the space of two weeks before yesterday.
Spectel said two weeks ago it intended to float in Dublin and London within a price range of €3.05 to €3.65. At the midpoint of this price range, Spectel would have been valued at €222 million. As it transpired, an extensive roadshow and bookbuilding exercise involving presentations to almost 100 potential investors in Ireland, Britain, Europe and the US failed to get close to the minimum €3.05 at which the flotation could have proceeded.
Mr O'Connell declined to reveal how far the company was short of the targeted price range. In his statement, Mr Moore said the price levels that could be achieved "did not fairly reflect the value of this strongly growing business". The withdrawal of the flotation is a severe blow to Spectel's growth prospects, as market sources believe that, with only its own resources to fall back on, it will have to scale back its ambition of making sizeable acquisition.
Mr Moore was due to realise €20 million from the sale of 6.5 million shares if the flotation had gone ahead at the midpoint of the indicative price range. If the IPO had gone ahead, Mr Moore's stake in Spectel would have fallen from 51 per cent to just over 29 per cent. Other investors who had planned to sell shares into the flotation include Enterprise Ireland, former owner of the Kilkenny People Mr John Kerry Keane and the former owner of Celtic Waste, Mr John Gallagher.
