Around the same time that Xero listed on the NZX, fellow tech company Diligent Board Books did also.
Diligent is a web enabled service that provides board members with all the information they require, while still meeting all the requirements of Sarbanes Oxley in terms of record keeping and audit. I told the tale of Diligent a few months ago.
While if truth be told it’s reasonable to say that neither IPO set the world on fire (Xero is hovering around a $0.75 shareprice, Diligent way down to $0.15) – Xero shareholders for the more part have been realistic and understood that it takes time to build a business – there have been no grumbles (or not many) and no large scale sell offs.
Diligent however has been a tale of woe. Their case wasn’t helped when it was discovered that CEP Brian Henry had failed to disclose his involvement with failed 1980s company Energycorp.
Now shareholders are considering a class action suit against Diligent, claiming that the failure to disclose Henry’s past had a substantive effect on the Diligent shareprice.
Not surprisingly a vulture law firm, Wakefield Associates, is spearheading the action. They’re working on a “no win, no fee” basis but…. they’ll charge double their usual fee if the action ultimately proves successful.
The broker who headed the IPO, McDouall Stuart, has come back saying of the letter to shareholders from the Wakefield Associates;
In its letter, Wakefield Associates has incorrectly highlighted the substantial loss of principal suffered by the IPO subscribers as being as a direct consequence of the failure of the offer document to disclose Brian Henry’s past association with Energycorp.
However, in our view, the current equity market turmoil is more likely to be found to be a more significant contributor to the difficulties Diligent has had in meeting its forecasts
Which is bollocks – sure the equity markets are falling but
a)Diligent has underperformed since day one, before the current crisis and
b)other IPOs from around the same time have held their pricing much better than DIligent
Surprisingly, and in something of a case of shooting themselves in the foot, Wakefield Associates have stated that;
When you look at the forecasts, and the complete failure to come anywhere near them, it makes me think they really weren’t ready for their public debut
Ain’t that the truth. A bunch of excitable guys, steeped in the 80s high flying era. Some hugely optimistic sales forecasts and some dumb investment decisions are to blame for this – not the fact that Henry has a pretty murky past.
Caveat Emptor in my opinion.