THE Irish Stock Exchange might have high hopes for its Developing Companies Market, which was given the formal nod last week, but judging by the planned NASDAQ float by Iona Technologies it is difficult to see how the exchange will be able to attract these sorts of high-tech companies to the new market.
Iona released details of its planned flotation and the software group - which made a profit of less than £1 million last year - will begin life as a US public company with a staggering market capitalisation of at least £165 million.
The Irish fund management industry is innately conservative and is distrustful of companies that it does not really understand. The almost total absence of local institutional investors on the Elan share register is proof enough of that. And the same institutions - with a couple of notable exceptions - also spurned CBT when it was a small company and missed out on the huge gains that followed CBT's NASDAQ flotation.
Multiples put on high risk/high reward high-technology stocks are so high that Irish fund managers will be reluctant to invest their cherished cash, and certainly any Irish fund manager looking at Iona's £165 million market value will be wondering on what basis US funds invest on such multiples.
Unlike Irish funds, the US market is choc-a-bloc with dedicated high-technology investment funds which are willing to take a lot of risk to find the next Apple or Microsoft. The attitude of the managers of these US funds is similar to that of a venture capitalist - expect eight or nine dud investments to be outweighed by the one gem. Irish fund managers simply won't expose themselves to that sort of risk.
Iona will be converting to a public limited company, but it will not be listed on the Dublin market. Likewise, CBT - despite having some Irish institutional shareholders - has shown little inclination to take a local listing. On this basis, is it really realistic for the Stock Exchange to expect the Irish high-tech sector to become a major component of the DCM? To this observer, probably not.
The flurry of trading in Fitzwilton following the reports linking Safeway with a bid for Fitzwilton was another highlight. The talk of a full-scale bid for Wellworth by Safeway soon changed to the more logical idea of a partial buyout, with industry sources now thinking in terms of Safeway paying around £100 million for a half-stake in Fitzwilton.
For Fitzwilton, this would mean that the group would realise enough cash from Wellworth to get rid of most, if not all, of its debt while still retaining a substantial presence in the Northern Ireland supermarket business.
The release of cash would also be timely, given Fitzwilton's option to buy another 3.7 per cent of Waterford Wedgwood - costing over £20 million at current prices.
