For many, the IPO itself is just the beginning, as the pressures of becoming a public company often force cultural and structural changes. And in the IT sector many have discovered the perils of the stock price rollercoaster, as good companies and bad have been swept up in a share price downturn which has yet to show any signs of abating.
ZDNet Australia looks into the highs and lows of listing on the stock exchange and examines the cultural changes IT companies go through as they open their books and step into the public domain.
Taking the good with the bad
Equity analysts are united on one point: technology stocks have generally under-performed in the broader market since April 2000. According to David Cooper, market analyst with Shaw Stockbroking, even sound IT companies have been sucked into the share price funnel. Although we are now 18 months out of the initial "tech wreck", Cooper believes it is still too early to say who will survive, predicting that we will see more listed IT companies go to the wall before things get better.
Craig Stranger, equities analyst with Hartley Poynton, agrees, comparing the tech bubble with a junior mining company boom which occurred on the ASX in 1995.
"Clearly it wasn't as widespread," Stranger said. "But these stocks came from nowhere, were inflated way beyond their real value, then suddenly disappeared overnight. Many of them never recovered."
This is cold comfort to many IT listed companies that have been struggling with abysmal share prices, despite sound business practices. Interestingly, those hardest hit were those that listed prior to the crash.
"Many that listed just prior to the crash never should have listed in the first place, but there were others that had been around for a few years and had a sound business behind them," Stranger said. "They are the ones that have been hardest hit, because their share price is now totally undervalued."
IT would appear many IT companies with good credentials rode out the crash, but are still finding themselves nervously repeating the Peter Costello line; "our fundamentals are sound, but the dollar is losing value because of external factors beyond our control."
John Grant, managing director of IT integrator Data #3, is well aware of the dilemma faced by IT company's which listed before the boom. Founded 24 years ago, Data #3 went public in 1997 in order to raise growth capital, and over the following few years managed to achieve its stated aims, acquiring a number of companies and growing the company substantially.
Data #3 is a clear example of a company that listed for the right reasons - and found itself swept up in the speculation regardless.
Despite a solid customer base and competent technical background, Data#3's shares were hammered in the April 2000 crash, and have continued on a downward slide ever since. And the squeeze couldn't have hit at a worse time for the company, as it had just embarked on its planned acquisitions which would continue through to January 2001.
-We have now felt most of the pain," Grant said. -We have bottomed out now and felt a lot of the pain already and aligned the business in a series of different areas so as to capture any growth in the market."
Having consolidated the acquisitions, and handed in losses in the September release to the ASX, Grant is now focussing the company on the task at hand.
Conversely, IT integrator Oakton Computing launched on the ASX several months after the April slump. In a similar vein to Data #3, the company had a long history of positive organic growth, and were listing in order to capitalise for further growth. However, in accordance with equity analysts observations, it was saved from the worst of the stock market backlash.
Paul Holyoake, managing director and co-founder of Oakton Computing, concedes the company has been saved from much of the pain of the crash by listing after the tech-wreck.
-Because we listed after the slump our shares were never at an unrealistic price," Holyoake said. -Unlike companies that went through the boom and bust we don't have a raft of share holders that lost out by buying in when prices were inflated, and to a certain extent that takes the pressure off."
